Cash For Clunkers Success or No?

The deadline for the Cash for Clunkers program has been posted as 8pm EDT on Monday, August 24th. Over $1.9 Billion has been claimed for 457,000 deals. Some claim that this has not been a success, and that it simply robbed future purchases from the coming months. Although I was very skeptical about the program in the early days, spending countless hours in dealerships, and watching full showrooms on recently dull afternoons, I have changed my opinion. Of course there is the possibility that it has stolen a few future sales, but the pent up demand was so intense that I feel it is more likely that the program just “unplugged the drain.” Had there not been extreme pent up demand, there would not have been 45-60 day old units not turning on the dealer lots. The factories would not have been on hiatus because there was too much product already produced. Therefore, clearing out those stale units means to me that C4C helped catch up sales.

What could have been done better? Well firstly, the communication on the rules and the requirements should have been more clear. Knowing that this was dealing with car dealerships, that were desperate for sales and just coming off months of fear with stores closing and sales slumping, everyone should not have been surprised that some false starts would be out there. Some dealers started selling cars on the program before the last of the rules were released. Of course they did. Their livelihoods depended on this working and turning around their business. You had to KNOW that this would happen. Therefore, clearly communicating the rules early, would have eliminated some of the early confusion and danger of first deals not being paid off. Secondly, more realistic expectations of the approval process work load. Of all of those 457,000 deals that came through, there were 300 people reviewing the documents and 2 people with final approval. That is nothing less than a set up for disaster. Now the NHTSA has upped the approval work force to 1000 people, but maybe too little too late. The big challenge that this created is a long delay in getting the dealers their money back, so much so that operating cash was drying up and dealers were having to make the tough decision to stop offering the program or they wouldn’t even have enough money to keep their doors open.

Congratulations to GM for stepping up and keeping their stores fluid by offering to front some of the cash to keep the dealers running.

Overall the Cash for Clunkers program has done exactly what it was supposed to do. It removed 457,000 plus polluting vehicles off the roads and improved the mpg up to at least 18 mpg on all of those vehicles. That will help the environment, and even oil consumption. Not to mention that it sparked sales increases in many brands and brought new vehicle sales back up to somewhat acceptable numbers. Next on the agenda should be how to repopulate the used vehicle inventories. Let’s get those fleet companies buying new vehicles, and get the program car market back on track. That will help pull down some of those ridiculously high wholesale prices and get the rest of the world back in a new (to them) vehicle.

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