Cash for Clunkers Two Years Later

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It’s been just over two years since the federal government’s $3 billion Car Allowance Rebate System — better known as Cash for Clunkers — took 677,081 used cars off the road, spurring an equal number of new-car sales in a recession-battered economy. Vince Powell says he can still feel its effects. Powell owns Powell Motors, an independent used-car dealership across the Willamette River from downtown Portland, Ore.

"Obviously a lot of them were junk and deserved to be called clunkers," says Powell, who owns the store his father began in 1933. But a sizable chunk — Ford Explorers and other four-wheel-drivers — were "decent cars," he says. "I think we’re paying for it now. Prices for used cars are up, and the cheaper stuff was higher now than it was before."

In the program’s aftermath, slashed supplies drove used-car prices up.

By Kelsey Mays | October 10, 2011 | Comments (11)

Top 10 Best-Selling Cars: August 2010

Cash for Clunkers continues to cast a long shadow: Big automakers had what looks to be a bad month, but last year the popular government program dramatically boosted the sales of many models, including the Toyota Camry, Honda Civic, Honda CR-V and Honda Accord. So the dramatic declines experienced by those models is not all too surprising.

Year-to-date, five of the models in the top 10 are selling less than they sold year-to-date in 2009. Before August, only one model on this list – the Dodge Ram – was selling worse in 2010 compared with 2009.

Toyota (down 31.4%), Honda (down 30%), Nissan (down 27%) and GM (down 24.9%) saw the most dramatic declines. Of course, Japanese automakers were the biggest gainers during Cash for Clunkers; GM’s decline is partly due to the strong sales gains by Pontiac and Chevrolet in August 2009. Chrysler saw a 7% increase because very few of its cars sold well during Cash for Clunkers.

The best selling full-size trucks — Ford F-Series, Chevrolet Silverado and Dodge Ram — performed well this month, and they were the only models on the list (besides the Hyundai Sonata) to post positive gains. Honda remains the automaker with the most cars on the list with three models, the same as last month.

By Colin Bird | September 1, 2010 | Comments (45)

Sales Surge for Family Cars, More Expensive Vehicles

HondaPilot
Cash for Clunkers infused $1 billion into car shoppers’ hands at the end of July 2009, boosting overall sales numbers for nearly every automaker during one of the industry’s worst periods in recent history.
 
We wrote a number of times during the program that sales of inexpensive cars did well because folks were looking for the best deal. Inexpensive cars also tend to be small cars. Fast-forward to July 2010, and sales numbers were significantly higher than the government-incentivized numbers of July 2009. If that isn’t a sign of recovery, the uptick in sales of more expensive non-luxury and family cars should be.
By David Thomas | August 3, 2010 | Comments (16)

Cash for Clunkers Haunts Car Dealers Turned Candidates

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Running for office has always had some overwrought theatrics, and a small group of car dealers running for U.S. Congress in the 2010 midterm elections has stumbled upon a political landmine that’s created opportunities for grandstanding and double talk.

Four car dealers now running for public office as Republicans are coming under attack by opponents (both Republican primary challengers and Democrats) for opposing “taxpayer bailouts” while benefiting from last year’s $3 billion Cash for Clunkers program.

For instance, Jim Renacci, running in Ohio, sold 39 cars under the CARS program, while another Ohio candidate, Tom Ganley, owns a number of dealerships that sold 876 cars through Cash for Clunkers.

After being hammered by opponents, both candidates have gone with the “I-had-no-choice” defense. Spokesmen for both Ganley and Renacci claim their candidates opposed the Clunkers program and would have voted against it. Pennsylvania candidate Mike Kelly, who previously said that Cash for Clunkers benefited his dealership, now says that it was little more than a “short-term boost.”

Running in Virginia, car dealer and candidate Scott Rigell has been hammered by fellow Republican Ben Loyola for the 138 cars Rigell sold under the Clunkers program. And in an all-too-easy bit of irony, what does Loyola do for a living? He works as a Department of Defense contractor.

Dealers-Turned-Candidates Run into Trouble (USA Today)

By Stephen Markley | May 12, 2010 | Comments (17)

Feds: Cash for Clunkers Worked, but Uncertainties Remain

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The Cash for Clunkers program succeeded in its broad, basic objectives of providing economic stimulus to a struggling industry, but ultimately the results are difficult to gauge, according to a report by the Government Accountability Office.

Despite Cash for Clunker’s success, the GAO found that “the extent of the program’s stimulative effect on the economy is uncertain." For instance, some of the sales may have happened regardless of the program, although the National Highway Traffic Safety Administration estimates that 88% of the 677,842 vehicles sold under the program were to buyers who otherwise would have stayed home.

The program's other goal was to improve fuel economy, and it did. The average fuel economy of the vehicles traded in was 15.7 mpg, while the new cars purchased or leased averaged 24.9 mpg. But because new vehicles tend to have far better mileage, the GAO says it’s reasonable that many of the new cars would have been more efficient anyway.

According to the Department of Transportation, NHTSA had limited time to design and implement the program’s consumer survey, which may make it harder to study for future policy decisions.

By Stephen Markley | April 30, 2010 | Comments (1)

Cash for Clunkers Sold More Cars Than Previously Thought

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The Cash for Clunkers program sold far more cars than even the government thought at first, according to an analysis conducted by the automotive market research company Maritz Research.

Martiz says Clunkers was responsible for 765,000 new vehicles sold. Some skeptics of the program said it simply robbed car sales from future months, but Maritz maintains that this prediction has not materialized and the cars sold never would have left dealer lots without the program.

This goes well beyond previous estimates: The Department of Transportation said the program was responsible for 346,000 vehicles that otherwise wouldn’t have been sold, while Edmunds.com put the number at 125,000.

About 542,000 of the 677,000 vehicles sold under the program were purchased by people who hadn’t planned on buying a new car. An additional 223,000 people who went to dealerships to check out the incentive bought a car even after finding out they didn’t qualify.

Martiz arrived at these figures based on a survey of 36,000 people who bought a new car or truck between July and August 2009, when Cash for Clunkers was under way. The survey points to data that showed nearly 80% of Clunkers customers were long-term car owners trading in vehicles with more than 100,000 miles on them, and half of the trade-ins were more than 10 years old.

In other words, these were people lured strictly by the well-publicized incentive and not those looking for the typical summer cash-back rebate from the automaker.

Cash for Clunkers: Better Than We Thought (CNNMoney)

By Stephen Markley | March 10, 2010 | Comments (4)

Clunkers Buyers May Have Some Regrets, Late Payments

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Higher credit risk buyers who bought a car using the Cash for Clunkers incentive last year have higher repossession and late payment rates and higher levels of buyer's remorse than buyers who did not use the program, according to CNW Research.

Those in the lowest credit category had a 4.8% repossession rate compared with those who bought similar vehicles without using Cash for Clunkers, which stands at only 2.2%. CNW could not discern if buyers in higher credit categories also have higher repossession or late payment rates.

When it comes to regretting a purchase, one in five who used the government’s $4,500 incentive said they now wish they hadn’t. The buyer's remorse rate for non-Clunkers buyers was one in 20.

It makes sense that more subprime borrowers would have difficulty making their payments. The regret could also be attributed to people who bought vehicles but have yet to see better jobs or wages materialize in a still-sluggish economy.

Many Cash-for-Clunkers Buyers Have Higher Rep, Late Payment Rates (DriveOn)

By Stephen Markley | January 22, 2010 | Comments (13)

Clearing Up Tax Rules on Clunkers Cash

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Recently, rumors have sprouted on the Internet that consumers who took advantage of Cash for Clunkers will have to count the program’s rebate as income and pay taxes on it.

For the record, this is not true. The Internal Revenue Service has said again and again that “the credit is not income for the consumer.”

However, the rules do not address state tax laws, and the National Highway Traffic Safety Administration, which administered the program, has no authority to tell the states that they may not consider the Clunkers money taxable income. You’ll have to check with your own state taxation office to be sure, but the good news is that the New York Times reports the tax departments of Connecticut, New Jersey and New York have all said they will not tax the vouchers.

Correcting the Chatter: For Consumers, No Federal Tax Due on Clunkers Rebate (Wheels)

By Stephen Markley | November 18, 2009 | Comments (16)

Used-Car Prices Dipping Back Down

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The Cash for Clunkers program definitely led to higher used-car prices over the past few months. In fact, wholesale prices for used cars hit an all-time high in September; this past December, used-car prices were at a record low.

Last month, overall prices dropped 0.9% after factoring in a seasonal adjustment. This is a welcome correction, analysts say. While wholesale prices don’t instantly correlate to prices on lots, they should have an impact relatively soon.

It seems that alarmists once again sounded warnings because of the September spike after Cash for Clunkers, and one month later we’re seeing a move closer to the norm.

Wholesale used-car prices show first decline since December (USA Today)
By David Thomas | November 10, 2009 | Comments (6)

Oregon Clunker Customers Get Scrapping Checks

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Some Oregon car buyers who traded in their old vehicles for more fuel-efficient models under the Cash for Clunkers program got an unexpected bonus check in the mail.

In addition to the $3,500 or $4,500 discount they received on their new car, dealerships like the Ron Tonkin Family of Dealerships sent checks to customers for the scrap value of their trade-ins. The government required that car dealers tell customers what their old vehicle’s scrap value would probably be but didn’t specify where the money should go. It said dealers could keep $50 of the cash.

Ron Tonkin told the Oregonian that although most of his customers had no idea the checks were coming, the dealership cut and mailed checks totaling roughly $200,000. Tonkin’s dealers were getting an average of $375 for the clunkers, so they deducted the $50 and mailed the rest to customers. It sold 681 new cars under the program and mailed out checks to those buyers averaging $325 apiece.

Other Oregon dealerships like Wentworth Chevrolet and Carr Chevrolet in Beaverton said they would send similar checks to their customers. All told, 253 Oregon dealers received $36.8 million in Clunker payments from the government.

This raises the question, though: Have dealerships around the country been following a similar protocol and mailing checks to customers? Or have they been pocketing the full value of the scrapped vehicles?

Some Auto Dealers Mail Clunker Customers Refunds (OregonLive.com)

By Stephen Markley | October 16, 2009 | Comments (6)

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