By now everyone has heard of the Cash For Clunkers program by the US Government. It’s the program where the government (see tax payers dollars) gives large incentives to consumers looking to buy a new fuel efficient vehicle. It breaks down by allowing a higher dollar amount, up to a max of $4,500, for buying a vehicle that gets over 10 more mpg than the vehicle you are trading in.
It’s a program that has proved very successful on paper, so much so they have even extended the program by an additional $2 billion. However, such a program can’t last forever, which got me asking a few questions.
First question, will future buyers be waiting around for government assistance before they buy their next vehicle? That is to say, once this incentive ends will the sales dry up until the next government intervention or will dealerships be capable of staying afloat on their own? I’m on the mind that sales will again tank, more dealerships will close, and consumers will hold on to their money again until the next incentive.
Similar consumer buying habits changed back in the mid 90’s when 0% financing was first introduced. It created a flux of buyers looking to capitalize. However, once dealerships tried to end the special promotion the sales ended as well. Just to keep the status quo, dealerships have had to continue that special promotion to some extent to maintain sales. Are we going down this road again?