Why Cash for Clunkers Could Devastate Auto Sales

The end of Cash for Clunkers

Cash for Clunkers is over.

More than 625,000 vehicles were sold as a result of the program, so I can’t imagine anyone who wanted to take the government up on its $4,500 offer missed out. Needless to say, the Cash for Clunkers program was hugely successful at luring people into dealerships to buy new cars.

But without the program, what happens next? Who will buy new cars now?

Well, guess what - I have a prediction: Auto sales will languish once again, and dealers will have one heck of a hard winter trying to sell enough cars to keep their heat on. The recovery of the auto industry will probably take even longer than it would have had the government just kept their hands off.

I don’t think Cash for Clunkers actually increased auto sales, I think it condensed auto sales into a single month. Which means the next few months are going to hurt for dealers and auto manufacturers.

Americans just binged on buying cars. The binge made us feel good. It gave us a sugar high of sorts that quickly spread across the country, resulting in even more binging. Now comes the big crash.

The fact that Ford, GM, and Chrysler all increased production of fuel-efficient vehicles made popular by Cash for Clunkers, combined with no more government assistance for consumers, means we’ll soon see an overstock of cars on dealers’ lots with no one to buy them.

Somehow dealers are going to have to lure people into their stores without powerful rebates, and we’ll be right back where we started.

Was Cash for Clunkers worth it?

-tgriffith

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From New York: Which foreign automaker is making a car for dogs?

The one and only jgoods gave us a great overview of what the domestic automakers will be showing off at the New York Auto Show. What about our foreign friends, you ask? Mercedes and Lexus will be showing off some hybrid SUVs (RX 450h and ML450, respectively), and Mitsubishi will reveal their aggressive new Outlander.

Here’s a preview of some of the other vehicles foreign automakers have brought to the show:

Porsche 911 GT3

With the controversial Panamera taking up so much of the auto world’s press, it’s nice to see this refreshingly sexy 435-hp stunner.

Scion iQ concept

Remember the Toyota iQ we’ve talked about before? Scion’s getting a concept version, too, with a look they call “fierce.” I call it “jet ski on wheels.”

Acura ZDX

Acura says the production version of this concept will go on sale this fall. Acura’s VP of sales says,

The emotional coupe styling coupled with a luxurious and dramatic interior and surprising versatility, allows the ZDX to define its own segment and attract an entirely new customer.

Right. They could’ve at least acknowledged that BMW created the segment with their X6 (which is getting its own attention, mostly due to the new M version and its 555-hp V8).

2010 Land Rover Range Rover

I have a thing for Range Rovers. High price and reliability issues aside, I find the look striking and the luxury inviting. The 2010 version gets an all new and all mighty 510-hp, 5.0-liter V8, along with updates to that intimidating appearance.

2010 Volkswagen Golf GTI

VW’s press release for this car compares the driving experience to that of a Porsche 911. If that were true, VW wouldn’t able to build enough of these. I will acknowledge, though, that it looks slightly less like a bar of Lever 2000 soap than previous versions. And that’s a good thing.

Dog-Friendly Honda Element Concept

Just for fun, I want to share Honda’s latest innovation. We all know people haul their dogs in their cars, and now those dogs can travel in comfort! This car features: a cushioned pet bed in the cargo area with an elevated platform; pet restraint systems;a load-in ramp to accommodate access to the cargo area; second-row seat covers with a dog pattern design that matches the bed fabric; all-season rubber floor mats with a toy bone pattern; a spill-resistant water bowl; and Dog Friendly exterior emblems.

No, I’m not kidding. But I sure wish I was. 

Concept or not, do you think it’s smart to build a car that caters to dogs?

-tgriffith

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If you have one, maybe you’ll have a relic of American history and laugh ...

 

Big SUVs: Coming back in style?

Whoa, put on the brakes folks because we need to take another look at gas prices.

Believe it or not, as of September 24, prices of our addiction had FALLEN for 6 straight days. And get this: during the summer, prices actually fell for 34 straight days.

There’s probably not any hope of prices going back to the comfortable good ol’ days of $2 a gallon, but with prices comfortably below $4, imagine what could happen if prices stabilize or even continue to fall.

It’s certainly possible that Americans will get used to our current prices and fall right back into our old habits of driving big SUVs. Before we know it, we won’t even think twice before piloting our Expeditions across town just to pick up a Blizzard from Dairy Queen.

Hey, it could happen. Just as auto manufactures begin panicking and shifting towards smaller more fuel efficient cars, the industry could just go back to the way it’s always been.  Auto makers would be in a real lurch after that!

It all makes me wonder if the current consumer demand for high MPG cars is a short or long term shift.

If prices stay where they are for a long period of time, I’d bet on our collective love for the SUV and even venture to say that instead of a backlog of Sequoias, we’ll see Sentras clogging dealers’ lots.

Hybrids? HA! If you have one, maybe you’ll have a relic of American history and laugh as you remember the time we freaked out and lost our faith in good ol’ gasoline.

So what do you think? Is now the time to pick up that Yukon Denali, while the value of SUVs are at historic lows?

-tgriffith

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