Report: Cash For Clunkers Could Be Broke By September

August 13, 2009


Three billion dollars is a lot of money - a lot of taxpayer money, to be precise - and that's how much has been allocated to the Car Allowance Rebate System (CARS), more commonly known as 'cash for clunkers'. But even that much money may not be enough, with early reports indicating the fund could be tapped out, again, within the month.

Dwelling on the cost to the average taxpayer makes the clunkers program seem like a failure of epic proportions. But there's another way to look at it - as a runaway success.

The only reason all that money is being used up, after all, is because people are using it to trade in old cars and buy new ones. That sort of market stimulation has pushed projections of U.S. car sales from a sub-10 million total volume for 2009 to hints at 11 million or even more. The latest reports from Automotive News indicate that 30-40% of the sales through the program are in fact 'incremental', meaning they are sales that wouldn't have otherwise taken place.

There's no doubt that carmakers are benefiting hugely from the stimulus, and as they benefit so does the supplier and secondary industry. Well, most of the support industry - as Bengt Halvorson recently pointed out, mechanics and aftermarket companies may actually be feeling a pinch as the gas-guzzling clunkers leave the roads.

There's even been talk of the clunkers program causing a used-car bubble as the supply of vehicles plummets due to the destructive solution used to keep the vehicles traded in under CARS from being re-sold.

But whatever way you look at it, the CARS program has been a roller-coaster ride for the public, government and industry, and though it may come to an abrupt end soon, it shows little sign of slowing down.

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