Daily Podcast: Clunker Nation

Edward Niedermeyer
by Edward Niedermeyer

If the CARS program has proved anything, it’s that America loves a deal. Big surprise there. In fairness, it also proves that giving away a billion bucks takes more than 30 days of preparation. And that good news is always welcome, even if it isn’t exactly good news. In the short term, the “success” of CARS is almost certain to bring about a re-up in funding; Cash for Clunkers will probably keep rolling along. In the longer term, there are two major issues to worry about. First, is the pull-forward effect. Redlining the market with federal stimulus will probably only delay a sustained and sustainable recovery in car demand. The second issue is that when the economy starts showing signs of sustainable, organic recovery, taxes are most likely going to be increased thanks to short-term stimuli like C4C. As the second most expensive purchase in a consumer’s lifetime, cars are likely to be especially vulnerable to reductions in take-home income. Doubly so if demand has already been pulled forward by said stimulus. With Cash for Clunkers, we are once again mortgaging long-term market stability and recovery for an orgy of feel-good consumption. Let’s try to enjoy the buzz while it lasts.

Edward Niedermeyer
Edward Niedermeyer

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  • John Williams John Williams on Jul 31, 2009

    What a waste. I really don't understand this program. Instead of throwing away perfectly good cars, more effort should be placed culling the true clunkers from the roads.....like the 1984 Chevy Celebrity that's not only 83% rust, but spews more fumes and liquids than Bill O'Reilly on a three-martini bender.

  • Greg Locock Greg Locock on Jul 31, 2009

    This meme that "a car is the second most expensive thing you'll ever buy" is a crock. I'd guess that for most people at least one out of health insurance and college education for the kids and your retirement funding far dwarf what you spend on cars, if you do the maths. Certainly in my case my total spending on health (direct and indirect) and retirement, are both greater than my total expenditure on my car, even if I were to buy it rather than lease it.

  • Mtymsi Mtymsi on Jul 31, 2009

    throughout all the editorials lies the basic premise that pent up demand is being pulled ahead I completely disagree with that premise and base it on thirty years of experience selling cars the trades that qualify for the most part are not coming from traditional new vehicle buyers, the customers are used car buyers traditional new vehicle buyers overwhelmingly trade in late model vehicles, ask any dealer

  • Justin Berkowitz Justin Berkowitz on Jul 31, 2009
    smedley : What ails us is the dual effects of too much consumer debt coupled with a bankrupt government. Yes. These are enormous, and I think it's great that you point them out. Consumer debt in particular has been shocking. There are trillions of dollars being deleveraged right now and it is going to make the economy (GDP + Growth in debt) look like it's shrinking.