Is Cash For Clunkers A Big Success?
The problem with articles like this is that they are very short-sighted. Sure there is a boost to dealers, to steel mills and scrap yards but how long will it last? While dealers have sold a lot of cars, it only amounts to less than 5% of the total number of new car sales predicted for one year. And dealers have collected only about 2% of the rebate mony from the government. With the program ending on Monday, plan on seeing a huge drop off in car buying after that. All the people who were planning on buying a car over the next 3-4 months will have already bought their vehicles, which leaves a big void of buyers through the beginning of next year. That will lead to reduction of car orders which will lead to a reduction in steel demand which will lead to a reduction in scrap demand which puts us right back where we are now, still a very fragile economy on the edge of recovery. I’m not trying to be a doomsayer, I’m just putting forward the picture that the logical part of my brain has painted. Believe me, I’m generally a very optimistic person so this is hard for me to say. So, what are your thoughts?
Tags: cash for clunkers, scrap cars
August 21st, 2009 at 4:31 pm
I agree that the long term effect will be minimal. I just hope the program did not encourage a bunch of people to take out loans they cannot afford to pay for their new cars.
August 24th, 2009 at 9:21 am
I agree. Wouldn’t it just be completely ironic if many of those new cars were financed and then defaulted, leaving the finance industry once again in a perilous state? Of course, I realize that the number of financed cars is small and spread over multiple finance companies so there isn’t much chance of a financial meltdown but it certainly could put additional strain on the economy if many of those car loans default.
August 25th, 2009 at 5:36 am
I doubt repos of these cars will be a big problem as it now requires a lot better credit rating to buy a new car than it did before the meltdown.
That said, while I was originaly a supporter of A cash for clunkers program that was before the final short sighted bills were passed and signed into law. The program we got was nothing like the program we should have got.