Cash for Clunkers Comes to a Screeching Halt: Small Cars More Popular Than Expected?

2010 Toyota Prius

Late yesterday the reports started rolling in that the Cash for Clunkers or CARS rebate program was thought to be in trouble. Apparently, the response to the program from consumers has been overwhelming; one might compare the response to throwing raw meat into a cage of hungry animals. This should be a good thing right? For months all we have heard about is the “state of the auto industry” and how they need support as one of the major economical influencers in the U.S.

Pile of junk cars

Here is the problem; so far the official record says that the government has paid out somewhere around $221 Million. That is far from the $1 Billion that was set aside to fund the Cash for Clunkers program, but reports from the National Auto Dealers Association (NADA) say that their surveys of dealerships show that there is a backlog of dealer reimbursement requests that will take up the remaining amount of the $1 Billion. Even local radio stations have been reporting that the CARS program has been suspended.

So this really begs the question, are people really into smaller more efficient cars or do they really just need the $4500 price break on new models? In Denver, where I am based, dealerships were offering not only the CARS $4500 rebate, but also matching incentives that would match the $4500 rebate as well. This means that you could take up to $9000 off the price of a new car. The real question is, if dealers have already taken in more “clunkers” than they can turn in to the U.S. Government, then who ends up holding the bag? Also, if a dealer can afford to match the $4500, then why aren’t new, modern and efficient cars priced better to cause the same stir in the market.

Bottom line—the CARS program got people into the dealerships, but will it ultimately help the auto industry? The silver lining in this is that a bunch of people, probably close to 250,000 households if you consider the number of estimated trade-ins, got a new more fuel efficient car for a good price.

Looking for more information? Then check out TheCarConnection.com's coverage of the latest Cash for Clunkers news. Also be sure to check out the latest hybrid news from AllCarsElectric.com: Hybrid Minivans?

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