Monday, September 21, 2009

Dealerships Suffer From Clunker Hangover

Sales at auto dealerships are predictably down a month after the popular "Cash for Clunkers" program ended, and now some analysts are calling the incentives an economic wash.
"We pulled people ahead that weren't in the market, so it got them to come out and buy those cars. Now we've taken, probably, some business from September and October, so we're probably going to see a softer September than we would normally see," explained Reliable Superstore General Manager Tony Stubblefield.
Missouri State University Economic Tom Wyrich takes apart the Clunker program from several different angles:
"It helps some people and hurts other people. Is that a good thing? It's not a good thing. It's just a thing."
  • "It caused people to accelerate the purchases of cars. Buy a car today, don't buy one in 2010, 2011. So car sales are up this year, but they'll drop off in the future."
  • "If affects the car sellers in a big way, in a noticeable way, in a way we can put in headlines, but it damages other other industries -- a lot of other industries in a small way that offsets that. People have to make all these car payments and when they start making car payments on these new cars they're buying -- they don't have the money to go out and go to Applebee's or buy something at the mall at Macy's."
  • "These cars were capable of transporting people and what we did was destroy them. We've got this housing crisis, price of houses have been falling, contractors got some real problems out there, let's go out and blow up some homes. We destroyed cars thinking that will lead to prosperity. And if that does, let's burn down our homes. This has amounted to destroying wealth, capital goods. And that is not smart. It's stupid."


Busplunge said...

My daughter and her husband had the fever during the clunker program.

Their old cars are paid for, they didn't need collision insurance, their personal property taxes are low, they don't have car payments, and their cars get them from point a to point with a reasonable level of comfort and fuel economy.

What the program did do was dry up the source of the thousand dollar car. This will hurt those who were the purchasers of the 1,000 car.

When I was younger and broker, I would buy a hundred dollar car or truck, drive it until it broke, park it and buy another. It was cheaper to buy a hundred dollar car than fix the old one.

The hundred dollar car now costs $1,000.00

good posting.

gumshoe said...

The economics professor fails to mention several points...

With consumers purchasing new cars with better gas mileage, it will lower our country's addiction to foreign oil. That's a national security issue and will save Missouri families fuel costs at the pump.

This didn't destory wealth. Wyrich needs to go back to Econ 101 and read up on the definition of an opportunity cost. Cash/wealth for Clunker...

Cash for clunkers kept Missouri families from being laid off throughout the auto-indutry due to folks purchasing new cars. We can't afford to have anymore of our families and neighbors laid off in this economy.