The Truth About Cash for Clunkers (Again, Still): Buyers Paid More

Robert Farago
by Robert Farago

Post-clunker mortem, CNNMoney says 700,000 clunker-traders “probably got a good deal.” The rest, not so much. “If you bought a car without a clunker in the last month, you’ve overpaid.” Ya think? “During the weeks the Clunkers program was in effect, buyers of the Toyota Corolla paid 29% closer to the full sticker price than before the program started, according to data from Prices were also higher on other popular models. Ford Escape prices were 13% closer to full sticker, and Ford Focus prices were 12% closer . . . on a dollar-for-dollar basis, car buyers were getting less car for their money after negotiating the deal.” And now?

Post-C4C, new car inventories are as spent as a [joke deleted]. In the short term, prices will remain firm. After that, well, we know the domestics’ have cranked-up their factories, readying themselves to meet demand that’s already been satisfied. Although automakers financial statements will be blessed (they log cars leaving the factory as “sold”), how do you spell languish? As The King would say, that’s when the heartache begins.

Look for prices to plummet in November and December after dealer showrooms have filled up ahead of what is traditionally the slack season for car sales.

Binge and purge doesn’t work for dieters. It’s not going to work for the car industry either.

[Thanks to gslippy for the link.]

Robert Farago
Robert Farago

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  • Bozwood Bozwood on Aug 28, 2009

    dingram01 : August 28th, 2009 at 1:25 pm "All CFC did was steal future sales. I keep saying this: I bought a car because of CFC. Without it, I would NEVER have bought one (a $1500 jalopy doesn’t count in this argument). So I was not a sale “pulled forward.” I was a sale, at all, period. CFC made it happen whereas it wouldn’t have otherwise. Believe me, I’m not the only one." And now you have a payment where you otherwise wouldn't. So, it would be safe to assume, that something will go lacking in the purchase department for you in the future because of it.

  • Bearadise Bearadise on Aug 28, 2009

    Bearadise, nj1266@"The $3 billion dollar in waste is NOTHING compared to the $766 billion in waste on the Iraq war. Do you complain about that as well?" Yes, I did. "Is it the govt’s job to bail out the financial sector to the tune of $700 billion? Did you complain about that too?" Yes, I did.

  • SCE to AUX SCE to AUX on Aug 28, 2009

    So I ask again, how will CFC spark future demand and prosperity? I agree with bozwood: the money consumers are now spending on new cars won't be spent elsewhere, like on houses or [old] car repairs, or 401k deposits. Increasing personal debt - or national debt - via spending does not lead to greater prosperity, especially when the items purchased are depreciating assets. CFC is merely a wealth transfer from the future to the present.

  • Pch101 Pch101 on Aug 29, 2009
    C4C was about moving iron. It most likely had a lot more to do with the overall economic need for consumption than with the automakers. If the economy was in this bad of a shape but the automakers were treading water, this program would have still been created, just as the Germans created theirs. In contrast, if this was just a mild recession but Detroit was in deep you-know-what, it's highly unlikely that this program would have been created. Again, I understand on this website, the audience is going to tend to be car-focused. But the politicos and economists who conceive of these policies are more interested in macroeconomic issues, not so much about all of the stuff that car enthusiasts spend a lot of time thinking about. It just so happens that cars are a very useful tool in boosting GDP, given their high cost and their use of debt. Between the absolute amount of money shelled out by the consumer and the lending activity that results from many car purchases, there should be a consumption multiplier, plus an effective increase in the money supply due to the lending, the latter of which helps to put a dent into deflation. the money consumers are now spending on new cars won’t be spent elsewhere, like on houses or [old] car repairs, or 401k deposits. The data says otherwise. Consumers have clearly been hoarding cash by dumping it into savings. This is one of those times when what may be logical for the individual (hunker down and save) is exactly the opposite of what the economy needs (spending and money velocity.) Until that savings gets converted into consumption, it slows down the recovery.