Cash for Clunkers' Impact on the Market

Now that the Cash for Clunkers legislation is on its way to being signed by President Barack Obama — he’s likely to do so next week — we wanted to weigh in on its possible impact on the market.

The initial thinking is that the new-car market will get a quick boost in sales from people looking to take advantage of an incentive that would otherwise not be available. But how big is this pool, and is that really how car buyers operate?

“What this program does is essentially shift the demand from used to new; it doesn’t necessarily create new demand where there was none before,” said Cars.com product manager Jonas Moskowitz, who specializes in used-car sales.

Moskowitz suggests that the typical owner of a car worth less than $4,500 might not even qualify for financing on a new car. According to the National Automobile Dealers Association, the average price of a new car is $28,400.

That doesn’t mean, however, that there isn’t a segment of buyers out there with a second or third car that may qualify. Parents may be able to buy a teenager a new Honda Civic with the help of a voucher secured by trading in the old family minivan, for example.

What do you think? This topic has gotten a massive amount of attention here on KickingTires, so we’re inclined to think there are a lot of people out there eyeballing potential deals.

If you’re considering taking advantage of Clash for Clunkers, tell us your story in the comments section below.

Comments

This is incredibly compelling! But will there be restrictions on the price of the vehicle? This could be up to 40% off a stripped down economy car. In Germany which has a similar program, the real movement was on the Czech economy imports not the BMW's and MB's. If there's no limit watch a lot of folks dive into small cars.

that is the point. people are to leave their evil suvs and get into some fit or yaris or aveo. what i want to know is what happens tot he voucher. can people turn around and give to it to the dealer as a down payment?

I do not agree with this program. It should even be discussed or in place as this country has no money to pay for it. China owns HUMMER now, what else do we want to sell to get them to buy our paper?
The government will be taxing us for healthcare benefits and whatever else. People on fixed incomes and the working poor are not going to buy these new cars.
I won't go into debt even if my car is 12 years old.

I was considering this until I sold my truck recently for more than $4,500 and ended up buying a 2010 Prius 3. I predict most that were in my situation would end up making a similar decision and get something more fuel efficient. Loved my SUV, but it’s time to heed the voice of warning. I’m hedging the future of energy.

ken, you do know that your truck is still out there polluting the world? some at greenpeace would be saying you are bad for selling your truck and it would have been better that you taken a hit and gone with this program. cars/trucks that go into this are taken to the junk yard and their days of damaging the ozone layer are over.

This is bad for those who own older vehicles and have to rely on junkyards for parts,as car companies are in a habit now of dropping parts off their roster once they hit 5 years old or so.So with no junkyard parts supply,no dealer part availability,they will all get what they always wanted....planned and forced obsolecence.And with todays OBD2 laws,if you fail emissions,and cant buy the parts to fix it,it will be off the roads permanently anyway.

JC,

I would've utilized the program had the truck not sell. However, with some on here that are claiming unfair this, unfair that, I figured I'd at least give it a selling chance. The last thing I want to do is to have the thought of my once loved SUV get stripped and destroyed. It deserves better.

wonder if parts like belts and doors will hot the market or if they are destroying the entire car. if not, that is probably part of the plan. fewer spared parts, the more likely you are to get another car.

Like the article points out, this plan simply shifts demand from used cars to new cars. There is no new demand created. specially now when there is still a lot of uncertainty in the economy. I think there are many people like me who either do not have a car note, or are close to paying off their existing note. These people will not, regardless of the incentive, go out and buy new cars. The fact is: although i have considered trading my SUV, not because i don't like it, but because the volatility of gas prices, an increase in gas prices to about $6 will not be as bad as getting another loan for an additional 3 to 5 years.

I think the people who wrote this bill are simply appeasing the handful of environmentalists who believe that the internal combustion engine should be phased out. Additionally, i think that in subsequent revisions of this bill there will be higher incentives for GM and Chrysler vehicles.

I don't think this is a brilliant idea.

They are sure not trying to really get rid of old cars and help people who need it. This will only help financially comfortable and successful people who just happen to still have an old car around.

If they had done it the way they did in Texas and said you could purchase any car up to 3 years old, they would have helped people who needed it and really encouraged people to replace old clunkers, but no....you have to buy new, which of course, costs way more than 4.500 more than a slightly used car.

This bill is ridiculous as crafted and primarily helps people who currently own an old pickup or SUV who might be in the market for something new. Its not going to add a lot of sales because of the demand that your old car be junked. This is a waste of money. They should have passed a conventional incentive plan that encouraged people to buy something new with few restrictions. If they cared about mileage the voucher could have been limited to vehicles with 4 cylinder engines.

Your are 200% right! We will be getting a Honda Civic for my recent grad after 4 years at a private university; with Obama's $4500 voucher by trading the Dodge minivan after 4 years of campus visits. That may be her only offset of a lifetime paying taxes. I grew up eating rice and beans and you cannot help the poor by giving to them. Wow, what a program(s).

Many owners of a car worth less than $4,500 do not qualify for financing on a new car - I work in consumer loans! The montly payment on the average price of a new car is $500-600. Of course we can have more government programs to force banks to loan; then we can bail them out again in 5-10 years.

Can I turn in an old town car, that I have never driven, 78' and get a voucher for a smart car?

Can we sell our old beaters for more to prospective car buyers so they can get the voucher?
Does the car have to be an American car?

could be any brand and you have to have had the car for 12 months.

we are middle income family..we have a 1994 suburban..needs some motor work. With kids in college there is no way that we want a $600+ payment again for 5-6 years.We live in northern states also where a 4x4 is needed and new suvs up here are 38,000 to 50,000+, just a bit out of range with a $4500 down payment-makes paying for a new motor or a few repairs look real good.

sharon. what if it was for a used car? maybe some saturn vue or honda cr-v? plus new cars have more airbags and other things like that.

I have been following this bill since 11/08. It has gone through many changes. A clunker is a clunker. I have 1979 Buick LeSabre that gets 9 mpg. It was given to me over a year ago due to a car accident. My car was totalled in the accident. I can watch the gas needle move every day. I don't understand why they are only allowing vehicles from 1984 and newer. THis car has the biggest V-8 engine that GM made in 1979. When gas was fifty five cents a gallon. I have not even filled this beast up since I have owned it. I work for a Dodge dealership and would be able to afford a 2009 Dodge Caliber that gets 27 mpg, but Noooo my car doesn't qualify. Thank you Congress

This bill was designed to appease the people who saw it working over in Europe. Unfortunately or fortunately if your a budge conservative the pols crafted this bill so it affects very few people. Last I heard only a billion has been approved to fund this. Its amazing to me how many people were screaming for something similiar to this happen but without so many restriction. Now something has happened and everybody is upset.

Let me get this straight. Your give-up car must be rated at 18 mpg or less to qualify. Then, your purchased car must be rated at 22 mpg or better. 18 to 22 is a 4 mpg net gain. But if you want to give-up a car rated at 19 mpg for a new car rated at 25 mpg (a 6 mpg gain) you"re out of luck because you don't qualify. Only politicians can come up with illogical garbage such as this.

My registration expired in September of 2008 and I paid the late fees in November. I have owned the car for over 4 years and have been driving it. Do I still qualify for the program?

my dodge intrepid doesn't qualify because there are two type of transmission for that make and year. No one can tell me what type transmission I have but are quick to tell me that my car won't qualify? I've heard from other's their car doesn't either - what's up?

As I've been shopping for a used car for my 16 yr old the past 2 months I've noticed that the cars that Consumer Reports and KBB list as cars within our price range, under $6000, are rarely to be found, and when I do find one, it seems the price is always quite a bit higher than stated. Seems like the supply is dwindling, causing the few that we do find to be pricier. Cars are already so ridiculously expensive, to purchase, run and insure...what's a 16 yr old to do?