Cash for Clunkers spoils used market

October 21, 2009

Retail car sales tumble at program’s end

By Jim Hagerty

Staff Writer

The federal subsidized program, Cash for Clunkers, was a hit for about 700,000 new car customers and a host of new dealers. With the program now in the books, dealers are, again, at the mercy of a bruised economy. The program ended Aug. 24.

In September, new car sales fell by about 10.4 percent nationally, and failed to increase consumer spending to the degree predictions indicated, experts say. The drop in sales is the biggest since August 2005. The Clunkers program subsidized new car buyers up to $4,500 for trading in old, even battered, vehicles, for more fuel-efficient cars.

As new dealerships return to the drawing board to attract customers without the help of federal assistance, used car shoppers aren’t finding much luck, either. Most cars traded in under the Clunker program were not viable used options and did little, if anything, to improve used inventories. Used dealerships, in turn, must hike prices and wait until new dealers start taking in solid trades and selling more new cars. For nearly every car solid under the Cash for Clunkers program, one car was sold to a scrap yard.

Economists say most cars bought with Clunker dollars were vehicles buyers would have otherwise purchased in the fourth quarter.

Cash for Clunkers, officially known as the Car Allowance Rebate System (CARS), began in July.

From the October 21-27, 2009 issue

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