Cash for Clunkers Interest Slowing; Could Run Out of Steam Next Week
By Michelle Krebs August 11, 2009
Interest in the Cash for Clunkers program is slowing, and, if the current trend continues, vehicle sales could be back to pre-Cash for Clunkers levels by August 20, Edmunds.com calculates.
Edmunds.com's analysis of purchase intent on the car-shopping Web site shows sales activity tied to the government's Car Allowance Rebate System (CARS) remains well above the period leading up to its July 27 public launch.
However, activity is 15 percent below the peak of the Cash for Clunkers frenzy, which occurred the last week of July and specifically on July 29. Barring any intervention such as a major incentive program or a significant uptick in the economy, sales will be back to pre-clunker levels by next week.
The Seasonally Adjusted Annualized Rate (SAAR) of U.S. car sales soared to 19.8 million vehicles in the last week of July when Cash for Clunkers was in full swing, putting the full-month SAAR at 11.2 million, the highest level of the year. Sales rates have been only 9-million-plus for the months earlier. Cash for Clunkers was the main impetus for the boost in sales, but so too was the traditional end-of-model year seasonality of sales and some economic improvement.
The Cash for Clunkers frenzy reached such a fever pitch that its $1 billion allocation was overscubscribed and Congress scrambled to come up with more cash. President Obama signed the measure for emergency funding of an additional $2 billion last Friday.
The funding for the original program was low relative to the size of the auto market, creating a Gold Rush mentality where consumers hurried to take advantage before funding ran out. In fact, it largely sopped up the pool of buyers who owned clunkers and had the ability to buy or finance a new vehicle. In addition, automakers are running extremely low on inventories of vehicles eligible and popular for clunker trades.
With additional funding now approved, the sense of urgency to participate in the program is gone and the pool of eligible clunker owners who can buy a new vehicle has shrunk. Interest in the program is fading as fast as the first billion was used up. Quite possibly, some of the extra $2 billion will go untapped.
Despite this decline in clunker activity, however, Edmunds.com expects auto sales to be improved through the summer as the economy slowly improves and value-oriented consumers look for deals before the new 2010 models start arriving, said Jessica Caldwell, director of Industry and Pricing Analysis. "The real risk is this fall. Will the economy have picked up enough momentum to keep sales at these levels?" -- By Michelle Krebs
LEAVE A COMMENT
I don`t agree that you can just extrapolate a line down to 20 August as you have done ont he chart. I would love to see the actual data plotted in a few weeks to see if you are correct.
It does seem that Edmunds is consistently trying to cast the CARS program in a bad light - first for glitches then when it was hugely popular you then mention it could run out of steam. Of course it will slow since a annual selling rate of 19.6 million is unsustainable.
Also looking at the graph 150 (which is where the guess-timate line corsses at August 20th) is still above the June and July data!
I tend to side with Edmunds on this one, only because logic supports their position. CARS pulled some 4th quarter sales into the third quarter, which may result in even fewer sales at the end of the year than had been projected.
If the industry ends the year at 11 million sales, it will be looked at as a roaring success. The only problem with that is that 11 million sales is 27% lower than the peak.
I am still unable to find an official daily ticker on the amount of cash for clunkers money used. Is there such a site ? If so please post the link.
Thanks
rayjay,
One of the reasons there was such hysteria over the program was that NHTSA was so far behind in processing the payments that NO ONE KNEW how much money had been spent.
The program's official website at www.cars.gov had a ticker going for a couple of days, before it became evident that there was no way it could be kept updated on a daily basis.
ADD A COMMENT