You'd be smart to point to historic pent-up demand for cars. The median age of cars hit a record high of 9.4 in March, 2009. Our fleet turnover (that is total registered vehicles divided by annual sales rate) is 40 percent higher than at any time in the last half century. At the rate we're currently buying, each car would have to last about 25 years.
Simply stated: Auto demand has nowhere to go but up, even if we don't hit the car-buying levels of the late-90s and 2000s. And when the government sweetens historic demand with cash guarantees, it's easy to burn through $1 billion in a week.
Update: If you're not sure what this whole Cash for Clunkers thing is in the first place, check out my FAQ, which I inauspiciously wrote about three hours before the program was sapped of cash.
why do you say this went "clunk"? isn't this an example of a program exceeding expectations? this program was derided as unnecesary, unwanted and a sop to detroit. yet consumers snapped it up. that isn't going "clunk" at all. going "clunk" would be hitting the program expiration date and still having money left.
leave the side-ways political commentary out of the analysis or, better yet, be up-front about your political observations.
heh, i guess you're right. i've changed the headline. good edit!
Gee! What a surprise that "consumers snapped it up".
Who would ever think that people wouldn't want about 4 grand in free (as in "other people's") money.
Oh! That's right, it was going make people buy nice fuel efficient cars -- except that it actually encouraged sales of SUVs by making such a ridiculous requirement of getting a whopping 3 or 4 more mpg than the old car. Even the tree huggers thought it was stupid.
Well it went "clunk" in the sense that the government obviously mispriced the rebate/misjudged demand. Taxpayers could have gotten a lot more stimulus bang for the buck by reducing the rebate.
My husband and I were out new car shopping at 9am on the first day of the program and drove home with one that afternoon. We improved our mileage by 10 MPG which, since we keep our cars practically until they go wheels up and we paid cash, will over the life of the new car save us somewhere between 60% and 100% of our outlay depending on the cost of gasoline.
What's not to like?
To be sure, this was funded with "other people's money" as noted earlier. But think of it as $1 billion that didn't go straight to Halliburton's bottom line or into some AIG executive's back pocket.
Yes, because the only other place that money could have ended up was in the pockets of some fat cat corporate executive.
That, Mandy Cat, is simply an uninformed, topical justification. I'm not knocking your purchase -- that is a smart move on your part -- but not every tax dollar is designated for corporate bailouts until proven otherwise.
My son used his 1985 Crown Vic, which he was getting 10mpg in town and 15mpg on highway, to get a 2009 Honda Civic-- rated at 26mpg/33mpg. Absolutely a more greener car.
The Honda Civic he purchased was assembled in Honda's Indiana plant. 60% of the parts in the car are manufactured in North America.
I believe this program will have a positive ripple effect across the economy from car dealerships, truckers, suppliers, manufacturing.
Spending other people's money? Yes. But so is unemployment. If you avoid increasing unemployment or can get someone called back to a job because manufacturing has increased-- you're reducing the spending of other people's money (unemployment).
My wife works in a distribution warehouse. Most of their work is warehousing & distributing parts for Honda & Toyota manufacturing in Ohio, Indiana, Kentucky, Tennesee. She sees more parts flowing to manufacturers in the past month.
Hopefully this program will bump that increase more in the following month as manufacturers need to get their "Just In Time" parts on the manufacturing floor to produce new cars-- and help keep my wife and her coworkers from "spending other people's money" via state unemployment.
The odd thing is that there are tons of high mileage used cars out there. You could have saved a lot more money buying one of them.
People still respond to phony "bargains" if it sounds like they are getting something for nothing.
Yeah, as I wrote in the FAQ yesterday, cash for clunkers is a beguiling deal because, hey, the government GIVING you money. But I can't imagine that all these people participating really understand whether the difference between the value of their car and the rebate is enough to make a new hybrid "affordable" on their budget.
The one thing nobody is mentioning is that this is a U.S. taxpayer gift to Toyota, Honda and Nissan. Just wait for the howls when people find out how many GM and Ford cars were bought vs. the Asian brands. At least we managed to rev us Japanese production and Japanese jobs and the Japanese economy … (and the Korean economy too!)
Why doesn't the government just lower the rebate? if the government lowers the rebate by half, my bet is that the program would probably still be popular and able to generate 2x the car sales.