Clunkermania: Obama's Cars Act Off to a Good Start

In June, President Obama signed the Cars Act. It makes $1 billion available for Americans that trade their fuel inefficient vehicles for brand new, greener ones.

Some dealerships have accepted cars in the program since July 1. However, most dealers were waiting for Friday in order to closely examine the program's final guidelines released by the National Highway Traffic Safety Administration. Dealership interest was so great on Friday and Saturday that the Fed's computer certification system crashed several times. Over the weekend, other federal sites that distribute consumer information about the program were also reportedly sluggish due to the overwhelming demand by new car buyers.

The program provides for up to a $4,500 consumer credit on an inefficient used car and applies that rebate to the purchase of a brand new fuel efficient vehicle. The motivation is to get more environmentally friendly cars on the road and at the same time boost new car sales. Judging from spot market reports on Saturday, the program may have its mark, initially at least.

Spokane, WA, Ford dealer Wend le Ford said that their car lot was the busiest it has been all year. "This is the biggest thing to hit the new car side of the business in a long time," said Andy Keys their General Sales Manager. "We had probably 70 to 80 people in the store on the program yesterday."

Clunkermania was also reported in the Los Angeles area. "We've clearly had traffic coming in that's being driven by 'cash for clunkers,' " said Marc Cannon, spokesman for AutoNation Inc., which owns 77 dealerships in California, "We started doing deals early this morning."

At Koons Ford (F) of Baltimore, Russell Martin reports that customer traffic at their dealership has picked up by 30 percent to 40 percent since the program was signed into law last month.

Additionally, manufacturers are now stacking additional rebates atop the "clunker money" to create some of the best new car deals that drivers have ever seen. Chrysler, for instance, says it will match the government's money for consumers who turn in a clunker and buy a 2009 model.

In St. Louis, MO, Steve Cancila, of Cancila Chrysler, exclaimed, "I never imagined that something the government came up with would be so successful... and I haven't seen [manufacturers] rebates like this in 10 years. It's insane the amount of money they're offering right now."

The new car sales kick-start followed surprise after surprise this past week. Early in the week conference board indicators gave more proof that recovery has started in the US Economy. Throughout the week, the vast a majority of stocks posted better than expected earnings, including a multi-billion dollar profitable quarter from Ford. US taxpayers got a 23% return on a huge TARP payback from Goldman Sachs. Existing home sales increased for the third straight month while starts of single-family homes have risen four straight months through June.

Finally, the week saw stocks break various records, as the Dow Jones Industrial Average topped 9,000 to set a new highest close for the year. Continuing the recovery pattern of 1975 , the index moved sharply higher , leaving many skeptical investors in the dust.

Disclosure: No positions

Comments

[Old Trader:]

Unfortunately, this'll be a one-time "shot in the arm" for the auto industry and the dealers, and I wonder how much demand will be pulled forward. Still, "something" is better than "nothing", I guess.

Jul 26 09:54 AM

[qw:]

Not sure this would be much "demand pulled forward".
Eligible products limited to 9 years to 25 years in age, may not be a huge percentage of this group who would normally buy a new product versus upgrade to a used vehicle .
Also, if very successful, there is talk about extending it to $4 billion.

Jul 26 01:46 PM

[casey00001:]

How is this a good thing? Chrysler now giving away nine thousand dollars in tax payer money. What a joke. And Ford, gets screwed no Gov't money to hand out.

Jul 26 07:44 PM

[sethmcs:]

My uncle tried to look for a Chyrsler. Lots are empty. Bought a Mercury. Considering all the talk about government support for GM and Chrysler the timing could not have been worse. GM just emerged from chapter 11 and Chrysler hasn't resumed production until Aug 1. Since there is only funding for 250,000 units my guess is the pie will be divided between Ford, Honda and Toyota in that order. GM and Chrysler will miss the boat. The first companies to receive DOE fuel economy modernization fund are Ford and Nisson. Next will probably will be Toyota. So much for the government giving a unfair advantage to GM and Chrysler.

Jul 26 10:58 PM

[User 461300:]

so much for the goverenments help. tried to trade my 1998 dodge intrepid in and get the cash for clunkers, but was denied. Seems like 11 yrs a GO IT WAS RATED FOR 22 MILES TO THE GALLON, WICH IT NEVER GOT. now eleven years later , and 75000 miles, it dosen't meat the gov.s standards. WHAT A Deal!

Jul 27 01:25 AM

[Tracey Ct:]

I always go into the dealership after doing my homework and tell them this is what I will pay. You have 10 minutes to decide. Then I will leave in 10 minutes if they don't like the price. Sometimes it works sometimes it doesn't. But it saves a lot of time. www.dvds-online-rental...

Jul 27 02:59 AM

[billddrummer:]

I did a hypothetical CFC trade for a car I used to own, and wouldn't have received the maximum credit because the car I now own doesn't get mileage good enough to qualify for the $4500 credit.

The kicker? The old vehicle was a minivan, the current one a compact sedan.

Makes you wonder, but it's good to see that traffic has returned to the dealerships.

Jul 27 03:19 AM

[update:]

This is SOCIALISM!!!!

You fools just lap this stuff up like mother's milk don't you?

Why am I buying other people's trucks for them?

And you all better believe that trucks are going to be what sells, with 2 miles per gallon better fuel economy than the old clunker worth $200 that Obama is forking over thousands for. It will be truck drivers who get down there fast and blow our tax payer money on this SCAM.

Jul 27 09:59 AM

[billddrummer:]

To update,

As a matter of record, Hyundai/Kia said that most of the vouchers are being redeemed for old trucks, and traded in for new cars.

Jul 27 05:03 PM

[update:]

Who gives a hoot which car they bought with my taxpayer money.

Jul 28 07:57 AM

[KKELLY:]

chrysler is matching the klunker rebate. it's not all tax payer money....


On Jul 26 07:44 PM casey00001 wrote:

> How is this a good thing? Chrysler now giving away nine thousand
> dollars in tax payer money. What a joke. And Ford, gets screwed no
> Gov't money to hand out.

Jul 28 01:57 PM

[KKELLY:]

CHRYSLER IS MATCHING THE GOVERNMENT REBATE. IT'S NOT ALL TAXPAYERS MONEY.....


On Jul 26 07:44 PM casey00001 wrote:

> How is this a good thing? Chrysler now giving away nine thousand
> dollars in tax payer money. What a joke. And Ford, gets screwed no
> Gov't money to hand out.

Jul 28 02:01 PM