Surprise: Demand for new cars collapses after Cash for Clunkers ends

posted at 5:50 pm on September 21, 2009 by Allahpundit

As predicted, the “hangover” is upon us. Here’s the glorious result of dangling $3 billion in free taxpayer money in front of car-buyers: Two months of artificially stimulated demand which spurred manufacturers to ramp up production, leaving dealers now with showrooms full of new cars — and no customers to buy them. At the moment, no one’s even sure if overall sales will be higher for the year. Genius.

Edmunds.com reports that “September’s light-vehicle sales rate will fall to 8.8 million units … the lowest rate in nearly 28 years, tying the worst demand on record. After the cash-for-clunkers program boosted August sales to their first year-over-year increase since October 2007, demand has plunged. In at least the last 33 years, the U.S. seasonally adjusted annual rate has only dropped as low as 8.8 million units once — in December 1981 — with records stretching back to January 1976.”

“Many people regard February as the darkest month of the recession, but even then (sales were) higher, at 9.1 million units,” adds Edmunds.com statistician Zhenwei Zhou.

Thanks to the glories of federal bureaucracy, it’s a double whammy on the dealers’ end:

“It was probably, in the end, a complete waste of taxpayer money,’’ said John Wolkonowicz, a senior auto analyst at IHS Global Insight, Lexington forecasting firm. “The dealers, who were supposed to be the primary beneficiaries, many were forced into cash flow problems because the government didn’t pay them in a timely fashion.’’…

Robert O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, which represents 441 dealerships, estimated that most are probably still owed money.

“This program was very good at getting product off the lot, but there haven’t been long-term benefits,’’ he said. “Dealers are reporting that showrooms are pretty dead right now.’’

Wolkonowicz said the fall slowdown may have been worsened by the program because many buyers came out early to take advantage of the program instead of waiting until now to shop.

No word on the alleged green benefits from chopping up all those gas-guzzling — but otherwise perfectly drivable — clunkers, but you already know from past posts on this site that whatever it is, it ain’t much. Exit fun fact: According to some back-of-the-envelope math by Americans for Tax Reform, the program probably saved around $375 million. After an investment of $3 billion.


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Regarding those ‘trade in’ clunkers; most dealers hope to ‘book’ the trade in below bluebook value and then sell that vehicle for profit. By throwing those clunkers in the junk pile, a chance to make an additional profit was lost.

Those junkers where ‘wholesaled’ and the used car sales guys are ticked off, i can assure you.

DrW on September 21, 2009 at 7:02 PM

This is EXACTLY what will happen with housing. Right now every so-called analyst is saying real estate is back, BABY!! No it’s not. It’s the C4C effect. Morons running out to buy a house to get the $8K govt check. That scam ends 11/30. And on 12/1 the sales volume will plunge to depths we have yet to see.

I wonder how many fools out there will get hit on the C4C and $8K scams? And by scams I mean their house will plummet in value and they got ripped off by the dealer with c4c.

angryed on September 21, 2009 at 7:06 PM

Edmunds.com reports that “September’s light-vehicle sales rate will fall to 8.8 million units … the lowest rate in nearly 28 years, tying the worst demand on record.

And it’s actually worse than that. The population today is 10-15% higher than 28 years ago. So relatively speaking it is probably the worst period for car sales, per capita, in who knows how long…ever maybe? 1981 was a pretty steep recession so it is much worse today than it was then.

HOPE N CHANGE

angryed on September 21, 2009 at 7:08 PM

I still mourn that car, and I want the head of the jackass that turned it in. Met my DH when he had one of those in black, dated him while he drove it. Good times!

I am just blown away that the individual has not been found by MSM.

ProudPalinFan on September 21, 2009 at 7:09 PM

Huh. That would explain the email I got today from Toyota telling me they “really really needed” cars like mine and they could give me a “really really good deal” if I traded it in. My car isn’t even 2 years old. I told them give me a 2.9% and we’ll talk, otherwise, not interested.

scalleywag on September 21, 2009 at 7:11 PM

Didn’t they go from the C4C to the refrigerator rebate? Has anyone read how that program is going? Plus we have the new home buyers 8K deal going on until Oct?

I can’t wait to hear what they cook up for after Oct when they are trying to spur Christmas sales…. the gov will turn into Santa.

journeyintothewhirlwind on September 21, 2009 at 7:11 PM

I can’t wait to hear what they cook up for after Oct when they are trying to spur Christmas sales…. the gov will turn into Santa.

journeyintothewhirlwind on September 21, 2009 at 7:11 PM

The container freight is down 20% = Christmas sales will be down.

the_nile on September 21, 2009 at 7:20 PM

juanito on September 21, 2009 at 6:38 PM
upinak on September 21, 2009 at 6:41 PM

I mentioned pop for a reason – I can’t stand coffee. I’m watching the developments like the one below from Knucklehead like Palpatine – “with great interest.”

10.2% tax on pop, cookies, junk food in Illinois now.
$5 million dollars for a carton of smokes.
Knucklehead on September 21, 2009 at 6:45 PM

What business is it of those in the statehouse, let alone the Fools on the Hill, what I eat, drink, etc? It galls me that those bastards in DC think they know how I should live my life better than I do. No. Simply, no. Given the personal piccadilloes that keep making the press (despite the best efforts of the ostrich media), they don’t know how to run their own lives, say nothing of me and mine.

I saw Steven Den Beste had a Greenroom piece this morning; it reminded me of something I saw from him back in his “USS Clueless” days. Something along the lines of how the Jacksonian tradition in US politics boils down to this:

“Ignore me and I’ll be happy to ignore you.
“Play square with me and I’ll return the favor.
“Try to dick me over, and I will end you.”

That’s something these DC bastards, of all stripes, need to take to heart, right quick. The next time I get a chance to “gently remind” them is when I sign their pink-slips next year. Do I look forward to it? And How!

Blacksmith on September 21, 2009 at 7:20 PM

Edmunds.com reports that “September’s light-vehicle sales rate will fall to 8.8 million units … the lowest rate in nearly 28 years, tying the worst demand on record.

And it’s actually worse than that. The population today is 10-15% higher than 28 years ago. So relatively speaking it is probably the worst period for car sales, per capita, in who knows how long…ever maybe? 1981 was a pretty steep recession so it is much worse today than it was then.

HOPE N CHANGE

angryed on September 21, 2009 at 7:08 PM

But remember 1981 wasn’t a banner model year for cars like…er…ah…well…er…never mind.

Jeff from WI on September 21, 2009 at 7:25 PM

I’m waiting for the new Oldsmobile to come out.

Jeff from WI on September 21, 2009 at 7:25 PM

Just spoke to my brother-in-law,manager at a Nissan dealership,business is slow layed of 10 people.

LennyV on September 21, 2009 at 7:39 PM

I’m waiting for the new Oldsmobile to come out.

Jeff from WI on September 21, 2009 at 7:25 PM

will there be a “Chappaquiddick Limited Edition”…?

small pockets of air, a snorkel and space blankets under the passenger side dashboard with a swivel open window so the driver can make a quick escape? Consumers gotta know…

ted c on September 21, 2009 at 7:41 PM

I want to see the new DeSotos with the biggest Flight Sweep fins and that great push button transmission and swing out front bucket seats!

Jeff from WI on September 21, 2009 at 7:43 PM

will there be a “Chappaquiddick Limited Edition”…?

small pockets of air, a snorkel and space blankets under the passenger side dashboard with a swivel open window so the driver can make a quick escape? Consumers gotta know…

ted c on September 21, 2009 at 7:41 PM

LOLOL…I’llkeeppitchin’ ‘em, you hit ‘em outta the park.

Jeff from WI on September 21, 2009 at 7:44 PM

right on right on!

ted c on September 21, 2009 at 7:46 PM

Uh, wasn’t this program supposed to run through sometime in October? I just have to ask… what happens when the gov takes over health care and runs out of $$ in the first weeks that was supposed to last the whole year. Can they cancel that program early too?

UnderstandingisPower on September 21, 2009 at 8:00 PM

Have you all seen GM’s desperation? 60 day money back guarantee. Hmmm, a free rental for 2 months. Might go pick me up an Escalade with 22″ DUB wheels this weekend.

angryed on September 21, 2009 at 8:01 PM

C4C rebate of $4500

PatMac on September 21, 2009 at 8:39 PM

C4C rebate of $4,500 – take off appx $2,000 because you traded in something of value. Take off another $1,000 due to taxable income of $4,500. Then take off another $1,000 because dealers have raised their prices due to frenzy of consumers buying before program end. Let’s see $4,500 rebate minus $2,000 trade, minus $1,000 taxable income, minus $1,000 for higher price and you net out about $500. Yep, great program for everybody.

Sorry about hitting submit too soon previously.

PatMac on September 21, 2009 at 8:48 PM

I am curious to see the loan defaults from people who were so exciterated they bought more car than they probably could afford. And am curious to see the outragous outrage when people figure out they have to pay tax on their gift from the government.

And yes, exciterated is a Tigger word straight from the Hundred Acre Wood. Wonder how real estate is doing there…

Rockygold on September 21, 2009 at 8:53 PM

Billions of Dollars to Be Burned Under New “Cash for Cash” Program http://optoons.blogspot.com/2009/08/billions-of-dollars-to-be-burned-under.html

Mervis Winter on September 21, 2009 at 8:58 PM

According to their new CEO, They’re putting their money where their mouth is.

If thats true the money back gaurantee isn’t worth the paper its written on.

bluegrass on September 21, 2009 at 9:26 PM

Million, billion, trillion… You wingnuts will nitpick anything.

Jim Treacher on September 21, 2009 at 9:36 PM

Wait until the good folks who took advantage of C4C find out they have to pay taxes on that $4500 bucks.

Poop hits fan.

Knucklehead on September 21, 2009 at 5:55 PM

The larger chitstorm will come when zombies who expect a tax refund every spring discover it’s shrunk or they may even owe money because The Precedent’s “tax cut” was simply a change in the withholding rate, not the tax rate.

ya2daup on September 21, 2009 at 10:25 PM

I just have to ask… what happens when the gov takes over health care and runs out of $$ in the first weeks that was supposed to last the whole year.

UnderstandingisPower on September 21, 2009 at 8:00 PM

This is already happening in the Bureau of Indian Affairs’ health care system. They have a saying, “Don’t get sick in the second half of the year when the money’s run out”.

ya2daup on September 21, 2009 at 10:30 PM

According to their new CEO, They’re putting their money where their mouth is…

bluegrass on September 21, 2009 at 9:26 PM

…around an appendage …not necessarily their own

ya2daup on September 21, 2009 at 10:32 PM

Stupid stupid stupid stupid stupid.

Waste billions of taxpayer dollars, distort the market and leave dealers high and dry, destroy real property of value, and encourage increased personal debt in a recession.

It’s the “breaking windows” theory of economic recovery as debunked by Bastiat a couple hundred years ago.

I would pay the rest of my income for the year to get a “do nothing” President and Congress, and I’d probably come out financially ahead.

I doubt those idiots could do more damage if they tried – assuming they’re not trying. I’d rather be governed by a bunch of 5-year-olds with Aspergers than these nitwits.

Merovign on September 21, 2009 at 10:39 PM

Million, billion, trillion… You wingnuts will nitpick anything.

Million, billion, trillion . . . pretty soon we’ll be talking serious money here!

miron on September 21, 2009 at 10:50 PM

I don’t know about youse guys, but I’m not buyin’ no new car until the next “Cash for Clunkas.” I be waitin’ til them, I tellin’ ya.

I may be a conservative, but I ain’t “‘tupid”, ya know?

marybel on September 21, 2009 at 10:55 PM

10.2% tax on pop, cookies, junk food in Illinois now.
$5 million dollars for a carton of smokes.

Knucklehead on September 21, 2009 at 6:45 PM

That 10% tax is on everything in Cook County, not just soda & junk food & not in all of Illinois.

mdenis39 on September 21, 2009 at 10:58 PM

Obama was bragging about thousands of auto workers getting recalled last week at his union love-in. Wonder how long that’s going to last?

By the way, I believe there is a cash for appliances coming up next month.

chickasaw42 on September 21, 2009 at 11:08 PM

The container freight is down 20% = Christmas sales will be down.

the_nile on September 21, 2009 at 7:20 PM

Exactly. Anything that will be on the shelves for Christmas is already in warehouses or en route, and not much is en route.

Vashta.Nerada on September 21, 2009 at 11:19 PM

Read more on this story at http://www.wnd.com

It’s beyond disgusting!

UnderstandingisPower on September 21, 2009 at 11:24 PM

We don’t buy new cars. This only jacked up the used car prices which hurts kids and those with less income.

In these uncertain economic times, it would be foolish to go into debt for a new car.

Common Sense on September 22, 2009 at 12:59 AM

exciterated is a Tigger word straight from the Hundred Acre Wood. Wonder how real estate is doing there…

Gee, I dunno. I’ll bet Joe Biden could tell us, let’s ask him!

oldleprechaun on September 22, 2009 at 8:09 AM

How much of the so called “end of the recession” predictions were based on the “improved” auto sales of the last few months?

MarkTheGreat on September 22, 2009 at 8:33 AM

Not to mention that it reportedly cost $1.38 in government administrative costs and overhead for every dollar of rebate issued. So much for the $300 plus million in ‘savings’. And oh, by the way, the average cost of used vehicles is artificially high because of the reduced stock that was crushed.

kens on September 22, 2009 at 9:43 AM

This economic abortion was spectacularly unsuccessful and proved harmful in the end. So when do we make it permanent?

SKYFOX on September 22, 2009 at 11:34 AM

Another shoe to drop… increase in used car prices:

http://www.newsday.com/classifieds/cars/used-cars-scarce-in-montgomery-1.1464731?localLinksEnabled=false

mankai on September 22, 2009 at 3:01 PM

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