Tuesday, August 25, 2009

Did Cash For Clunkers Program Work?

Of course it did, but its success has to be measured against who benefited.

When the program ended at midnight Monday, the entirety of the $3 billion program had been gobbled up by upwards of 600,000 buyers who were given $4,500 to exchange old gas guzzlers for new vehicles that get at least 22 miles to the gallon.

The primary purpose of Cash for Clunkers was to jump start the ailing American auto industry, and that it has done -- to an extent. July sales were up 2.4 percent and judging from the crowds in showrooms, August sales will be, too.

Five of the most traded-in cars were Fords while two of the five most popular new cars were Fords. The other three were Japanese makes, and this has everything to do with the fact the General Motors and Chrysler offer few fuel-thrifty cars.

There is an additional downside: People attracted to a program such as Cash For Clunkers or any of the popular rebate schemes that have kept Detroit on life support probably were going to buy new vehicles anyway, so the program actually cannibalizes from future sales.

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