Cash for Clunkers' Success Sparks Complaints

Clunker You can’t please all the people all the time.

That seems to be the overarching lesson from the success of the Cash for Clunkers program, which has delivered on all its intentions, from spurring economic activity to replacing old, inefficient vehicles with new fuel-efficient models.

One of the loudest complaints is that the Car Allowance Rebate System is merely compressing sales from people who would be buying over the next few months, shoving all those car sales into July and August. Analysts like George Augustaitis from the auto-consulting firm CSM Worldwide predict a precipitous drop-off after CARS ends, followed by weak sales for months.

While it remains to be seen if this is the case, this analysis misses the point that one of Clunkers’ main goals was to nudge car buyers toward fuel-efficient vehicles, and in that regard it’s been extremely successful. By the end of the program, 750,000 vehicles will have been replaced with ones that get around 5-10 miles more per gallon if current trends continue. It seems unlikely that consumers would have made the same environmentally conscious leap without CARS, especially with gas prices at reasonable levels.

Then you have used-car dealers and automotive recyclers simultaneously complaining that CARS is robbing their respective businesses. Used-car dealers say the government incentive is leading people to buy new cars and scrap their perfectly good (albeit gas-guzzling) old ones, while the Automotive Recyclers Association gripes that the engines being destroyed through the program are the most valuable parts of the scrapped vehicles, accounting for 30% to 35% of the revenue from each car.

Yet it’s completely ridiculous to say that the majority of the 750,000 vehicles would have been scrapped, thus ending up as profit for automotive recyclers. Many of these cars would have simply gone to used dealer lots over the course of several months or years, according to those CSM analysts. Therefore, isn’t the $200 they earned from scrapping the frame of the car and the $300 from other parts simply an unexpected boost during a tough economic time?

Bob Cole of North Shore Towing and Recycling in Evanston, Ill., certainly thinks so. He told the Chicago Tribune, “I was pretty proactive in seeing that this could be a good thing. It’s good for me and it’s good for everybody.”

Cash for Clunkers has even spurred economic activity for manufacturers of sodium silicate, the chemical used to kill engines. 1st Ayd Corp. of Illinois has packaged and supplied sodium silicate for roughly 600 cars, according to general manager Joe Sostarics — sales that never would have happened without CARS.

Of course, that fact didn’t stop him from telling the Tribune that once CARS ends, “It’s going to end the sales for sodium silicate.”

Guess there’s no making everyone happy.

Where Clunkers Go to Die (The Chicago Tribune)

By Stephen Markley | August 12, 2009 | Comments (19)

Comments 

Dan

Is it compressing future sales into the present, or unlocking delayed sales from the past?

I honestly have no idea, but considering the incredibly low rate of auto sales over the past several months, I don't think the latter idea is crazy.

valero

Studies show on average, it will take 5 years before the fuel savings make up for the carbon footprint of new vehicle purchased.

valero
So in 2015 we'll be really far ahead of things right?

CyCarConsulting

Over the last few weeks an interesting element developed with this program. Some under paid single mothers have been able to upgrade their cars,where it was not affordable before. In speaking with salespeople about the type of buyer that was coming in, they confirmed seeing several single moms, otherwise unqualified buyers, now with the clunker money, purchasing an affordable, much safer car. If more children can be driven to school in a safer car, how could any program be more successful than that?

Amuro Ray

Car sales will most likely bomb very soon...again. WIth such high unemployment rate, and the huge deficit (a.k.a. huge tax increase coming), not to mention all the incentives gone (CARS, income tax deduction for new car purchases, etc.), most people won't go for any purchase any time soon.

If u really look deeper into things - have we heard any OTHER news on increase sales, such as clothing stores, home improvement stores, etc. in recent months? Those can now serve as more accurate indicator on how good our economy is really going, since they have no incentive from our gov't to attract buyers at all. If u see brisk sales on the rest, then good chances that car sales will be good too!

Amuro Ray

Dan, I seriously doubt the unlocking of delay sales hypothesis there. U c, many manufacturers, esp domestics + some japanese like Nissan & Toyota, have been trying to lure clients in via significant incentives on relatively new - or even brand new models. Kinda like the firesales from GM, Ford and Chryslers several years ago...

Failure this time around.

Consumers aren't even buying with huge incentives, not because the incentives aren't attractive, but many people got lay off, and even foreclosures on their properties. To buy, u must have money or credit. Not in this economy.

Dan

AR-
Agreed, the larger impact on the auto market will definitely be the poor economy.
However, before CFC auto sales were X (I think around 9M annualized, but it doesn't matter), right now they are X+Y (I think around 11M). When CFC is done, where will they fall? Will it be to X, driven by a poor economy, or X-Z, some even worse number driven by sales moved forward by CFC?
It isn't clear to me that it will be any lower than X. The average age of a car on the road has increased in the last few months, and it isn't because people like older cars now. People want new cars, but have decided they can't afford them yet (perhaps because they don't have a job). My question is how many of the people dragged in by CFC have been those delaying purchases? I don't imagine that everyone who hasn't been buying cars for the last few months has given up on ever buying again. I'm sure there were many who were trying to be more prudent, or waiting and seeing.
I believe it is highly possible that sales will drop below their already depressed rates after CFC, I just don't think it is a forgone conclusion.

Maggie

Cash For Clunkers seemed like the perfect solution for our family. We had everything ready to show our clunker qualifies. After spending three hours at the dealership, we were told our car does not qualify because there was a two month break in the registration. We've had this car for two years. The law stated we must get an emissions test before renewing our registration. Just so happens that our trans broke and we couldn't physically get the car to the emissions place. All in all, due to that 2 month break, we no longer qualify for Cash For Clunkers. Sucks!!!

Maggie

Cash For Clunkers seemed like the perfect solution for our family. We had everything ready to show our clunker qualifies. After spending three hours at the dealership, we were told our car does not qualify because there was a two month break in the registration. We;ve had this car for two years. The law stated we must get an emissions test before renewing our registration. Just so happens that are trans broke and we couldn't physically get the car to the emissions place. All in all, due to that 2 month break, we no longer qualify for Cash For Clunkers. Sucks!!!

Tim

Are the single mothers really better off in a tiny new car with a debt vs. an old big car owned free and clear in this economic environment? If the single mother couldn't afford to buy the car before, what makes a $20k new car suddenly that much more affordable at $4000 (minus whatever the trade-in value would have been) less? On the other hand, the real poor single moms, or the ones with enough sense not to load up on new debt to get a new car, will soon find maintaining their existing old car much more expensive as the potential donor cars are destroyed.

It's a scam to squeeze the poor to enrich the bankers and the unions . . . as usual.

L.S.

This is a scheme to get a lot of people into econoboxes one way or another - directly through the program or later on due to increased ownership cost of the clunkers due to lack of available parts.

Placing those people in even more debt for the next 4-6 years is a sure way to keep this economy in its current state. Furthermore, any environmental benefits from having more fuel efficient cars on the road is most likely more than offset by the costs of producing those new cars.

And isn't this kind of irresponsible state managed wealth redistribution a common characteristic of socialism?

I am a very happy 'clunkerdumper'!! Was begging to get rid of a '00 Chevy Blazer/4WD/100K miles/12MPG, that was worth $1500. A/C didn't work...etc. Thanks to CFC, dumped it, got a brand new Corolla for <10k w/0% for 60 months, and will realize savings of $125/month on gas back and forth to college this fall. By the way, a local dealer decided to keep his row of Corollas intact by not coming off MSRP by more than a couple of hundred bucks. Said he would have more to sell next month. The dealer I purchased from had 3 left in inventory when I stopped by, and, with my clunker, put me in his Corolla for UNDER $10K. He says if I get more in, I will sell 'em. Said something about being tired of looking at inventory the last several months. Gotta reload sometime. New cars need the oil changed and that just makes 'em at least come back to the dealership. Made sense to me. I would have had to wait a couple more years to dump my clunker without this.

ThinkerDude

Tim you are right 110%, one of my friends is a single mom and she drives a paid Taurus and she is not going to be in debt just for a car... and probably the Taurus is going to be safer than a lot of the small alternatives.

deb

WOW! Education is what we really need in both auto recycling and the green industry. What we don't know really will kill us!! Take a look at the youtube video entitled cash for clunkers boost sales http://www.youtube.com/watch?v=6GRmprS92lk

The video shows all things that should not be happening once a car is taken from the car lot. The cars should be taken to a auto recycle center. The car parts are lying directly on the ground-BAD! then crushed in a non-contained area-BAD! The auto fluids are running into our ground water! If I know this location correctly, it is next to the Chicago River...The "junk yard" chosen for this video should be removed as a choice and a TRUE recycle center should be chosen. We have several to choose from, why did this place get chosen by the news and why are they one of the main choices???
LETS NOT DO MORE HARM THAN GOOD!

John

The best thing about the CARS program is that it is eliminating inventory. This will get people back to work.

FlashF

I just traded in Grandma's 1990 Chevy Caprice Classic - white with red interior, fully loaded with only 19,120 miles on it for cash for Clunkers. Even though the car looked like the day it was made, it went to the big scrapyard in the sky. The only defect it had was a very small scratch a half inch long below the door molding...otherwise it sat in the garage for 19 years. I watched it get a dose of Engine Bomb. Grandma got a 2010 Kia Spectra for it.

Dan

Cash for Clunkers - Not!!

We thought the program would be great for my wifes 1999 Dodge Caravan with 120K (Great van by the way -guess we were lucky). We did a lot of shopping around at dealers and settled on one. We made it quite clear this is C4C deal. We provided our paperwork and vehicle. It has been 3 weeks we have been without our old car and we have no new car. Dealer states we are waiting for Government to approve car and cannot release our old car. Governemnt states there are no problems. We have no car and my wife is stuck at home or left borrowing cars from friends and family. The dealer we are working with has 50 other cars in same situation. I cannot understand why more people are not complaining. Is anyone else having problems getting the new car as part of this deal. According to our dealer he states it is a nightmare for them. Spoke with Congressman who initiated this program and he is not able to do anything!

Ursan

I am at least for the some part, against this program.

I think it's good that the government is trying something to not only help consumers get into a more fuel efficient car (even though it won't save them any money until it's paid off unless they pay for it all at once) and is helping out the auto industry, which to be fair, is helping lots of people keep their jobs, even though they caused their own issues.

Isn't this just re-enforcing Americas "throw it away, don't fix it" mentality?

I got into it with my mother a year or so ago after she told me that all the money I'm "wasting" on my 1990 Volvo should be toward a new car.

So I worked out the maths with her.

For an econobox, we figured $199.99 per month for payments.

Plus the loan rates, plus the insurance which requires full coverage as I'd not be buying it out right.

At a bare minimum, I'd be paying about $3,500-$4,000 per year.

I bought the car for $1,995.

To date (3 years) I've put a total of $2,000 into it in repairs/maintenance. It doesn't get great mileage, but it's paid for.

That'd bring it to $111.00 per month for the car and another $53.00 per month I pay for insurance which brings me to $164.00 a month.

That new econobox would be just under twice that. ($320 or so)

Even with my cars 18/26MPG city/highway wouldn't cover the cost of that new car.

Plus, I don't *WANT* a new car. I've yet to figure out the cost benefit of new over used. Even a used econobox is a better choice.

My biggest issue is the fact that the engines need to be destroyed. Aside from this being an environmental horror story, it is taking money away from auto recyclers and used car sales people.

If I need a cylinder head for my car, should I pay $1,500+ for it new from the dealer, or $100.00 used from the junkyard.

Add to that, it's FAR less damaging to the environment to REUSE something, than to either recycle or manufacture from scratch.

One last thing, I heard on NPR and other sources, that overall, a new car is more damaging to the environment than a used car for a period of time (depending on the cars) because of the environmental impact of building it. Hybrid cars are among the worst of new cars for this because of the battery manufacturing process.

Had I been a lawmaker, I would never have voted on this without serious revision. Even if the cars were to be recycled and not sold to used car dealers, I'd still be happy. I can't and won't accept that destroying a perfectly good running engine is a good thing.

JV

To FlashF:

Your grandmother's Chevy might have made a nice car for someone ELSE's grandmother, but you obviously don't care about that.

The Chevy used about 63 gallons of gas per year, the Kia will use about 38 gallons of gas per year, assuming 16 mpg and 26 mpg, respectively, and your grandmother's annual 1000 miles of driving. Even if gas went to $10 per gallon, she would save only $250 per year on gas by driving the Kia. If the Kia cost $10,000 after the rebate, it would take 10,000/250 or 40 years to break even.

I am sure that you were just being facetious, but if you really traded that Chevy for a Kia, then I guess the joke is on you.

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