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

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.

Advertisement 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 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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Jazz Shaw 10:01 AM on December 02, 2023