Yuka Yoneda

Cash for Clunkers Program Ends Tonight with Mixed Reviews

by , 08/24/09
filed under: Green Transportation

cash for clunkers, fuel economy, department of transportation, c4c, cars program, car trade in program, cash for clunkers ends, electric vehicles, government stimulus

Cash for Clunkers – if you live in America, chances are that you’ve heard of it. The program, a.k.a. CARS, was the U.S. government’s strategy to get more people to buy vehicles – especially fuel efficient ones – by offering them rebates up to $4500 when they traded in their old gas-guzzlers for newer models. The program will officially end at 8pm EDT tonight, so if you still want to participate, run – don’t walk – to your nearest dealership (call first to see if they are involved)! So was the program a success? While the huge crowds and sold-out lots over the weekend may indicate that it was, there are still many loose ends that need to be tied up before we can say that Cash for Clunkers were positive in the long-run, or even necessary at all.

As of Thursday morning, more than 450,000 transactions totaling approximately $1.9 billion have been submitted by dealers making the program a triumph – at least in terms of popularity with carbuyers. “This program has been a lifeline to the automobile industry, jump starting a major sector of the economy and putting people back to work,” said U.S. Transportation Secretary Ray LaHood. “At the same time, we’ve been able to take old, polluting cars off the road and help consumers purchase fuel efficient vehicles.” Indeed, CARS has been able to captivate the interest of the public and draw them to car showrooms, when no other dealer incentives were really doing the trick. Another feelgood outcome has been that much of the unmovable inventory that caused many a worry wrinkle on the foreheads of auto execs has flown off the lots. In fact, both General Motors and Ford have ramped up production and rehired laid-off workers, putting cash in their wallets and in turn back into the economy.

cash for clunkers, fuel economy, department of transportation, c4c, cars program, car trade in program, cash for clunkers ends, electric vehicles, government stimulusPhoto by Keetsa

The positive psychological effects of C4C have been boosting for America, but there is still work to be done – a lot of it. The Department of Transportation has tripled its staff in order to process applications and a “significant number of reviewed applications have been passed back to the dealers because they did not include all of the information required under law to make a payment.” That means that dealers will then need to make the necessary corrections and resubmit them for further review. From the DOT’s standpoint, there is always the chance of fraudulent claims, so applications need to be checked thoroughly, and the worry on the dealers’ end is that they won’t receive their rebates – both sources of headaches that some say may not be worth it in the long run.

Another common thought is that while there was a mad rush to showrooms during C4C’s run, a few weeks of even a very large number of people buying a large number of cars will do little to boost 2009 sales if people don’t continue to purchase vehicles throughout the year. Like I mentioned earlier, there was a huge amount of inventory which means that people were waiting to buy. That means that if you were planning to get a car later on in the year, and then heard about C4C, you there is a good chance that you would be motivated to move your purchase to the present – but it’s also quite likely that you would not buy another car for a while after that. If most Americans share your reasoning, 2009 may not see too many more car sales, meaning that the $3 billion we spent on C4C may not have been that great of an idea.

There are other trends that C4C has been blamed for, which also weigh down the negative side. You know those charities that will take your old clunker for free? They witnessed a 12% downturn. And in terms of the economy as a whole, Morgan Stanley analysts believe that C4C is even hurting other non-auto sectors, which fell 0.6 percent in July despite growth in June.

cash for clunkers, fuel economy, department of transportation, c4c, cars program, car trade in program, cash for clunkers ends, electric vehicles, government stimulus, hummer h3

And is Cash for Clunkers actually helping the environment? Some say yes – after all it has helped to get hundred of thousands of super-low mpg cars off the road. But others point out that technicalities in the terms of the program allowed consumers to buy automobiles that aren’t very green at all. For example, the Hummer H3T, which gets 16 miles per gallon, is on the list of vehicles that you could trade your old car in for. Call us crazy, but that doesn’t sound very green.

Given all of these factors, Cash for Clunkers is looking to be somewhat of a disappointment. However, there is still time for the good to outweigh the bad. If cars do continue to sell at a steady pace after the program is over, and the upturn in jobs can somehow be maintained, we might be able to turn frowns on critics’ faces upside down. And even if C4C does turn out to be a complete bust, at least we know what not to do next time.

Lead photo by CashforClunkers101

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2 Comments

  1. jwhenry2808 August 28, 2009 at 6:26 am

    The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

    Henry

  2. s3xt0y August 24, 2009 at 3:51 pm

    this cfc was good in the beginning, now its just annoying, we got turned down for a car because we didn’t have our car for over a year, 11 months isn’t acceptable for them, it’s pretty sad how they would turn down business just because we didn’t have the car for another month, which also raises another issue in used cars pricing going through the roof, all the new teenage drivers looking for a cheap used decent car, is gonna have to pay higher than normal because of this program, it was alright in the beginning but the little rules they don’t tell you will nip your bud later.

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