Cash for Clunkers Impact Underestimated, Researcher Says

Last summer’s “Cash for Clunkers” program netted at least 87,000 more sales than the U.S. government estimated, and data suggests potential for another stimulus program remains, a global provider of automotive research says.

Maritz Automotive Research Group, which relied on feedback from 36,000 car buyers and lessees, finds Cash for Clunkers totaled 765,000 new vehicles.

In its report to Congress, the National Highway Traffic Safety Admin. says the $2.9 billion program spurred 677,842 sales.

“(Cash for Clunkers) also created some halo sales,” says Dave Fish, Ph.D. and vice president of Toledo-based Maritz.

Fish claims 87,158 people who went to dealerships seeking a Clunkers’ deal discovered their trade-in did not qualify but bought a vehicle anyway.

The government incentive program offered consumers either $4,500 or $3,500 towards the purchase or 60-month lease of a new, more fuel-efficient vehicle if they traded in an eligible, less-economical vehicle.

Fish also notes the government’s final sales figure does not include consumers intending to buy without the stimulus, but signed up for the rebate when they found their trade-in qualified.

Taking those buyers into consideration, he says, the program drew some 135,842 additional sales than NHTSA reports.

A Clunkers’ program still would have legs, he says, citing how quickly the government burned through the allotted money – it lasted two months, when initial expectations called for up to five months.

“That would indicate there are probably quite a few (additional car buyers) out there,” Fish tells Ward’s during a conference call earlier today to discuss his findings. Also, he adds, the program drew from the used-car market, not the new-car market, softening the “pull-ahead” effect.

“Different buyers,” Fish says of the majority of Cash of Clunkers customers. “They are people who tend to keep a vehicle for a long time. We were pulling from the used-vehicle market.

“Is that bucket of used-car buyers exhausted?” he asks. “Probably not.”

Fish also refutes claims the program was too costly to taxpayers and did not fulfill its stated objective of replacing gas-guzzlers with more fuel-efficient vehicles. Although fuel-sipping small cars were among the program’s top sellers, lots of big trucks were traded in on similar models with better fuel efficiency.

“The taxpayer paid the bill, but you can see the dividends paid in terms of the economic recovery, the impact on the environment and the whole supply chain – from dealer up to the manufacturer,” he says. “It met a social goal and a business goal.”

According to Ward’s data, Cash for Clunkers drove a spike in August light-vehicle fuel economy to a record 23 mpg (10.2 L/100 km). The following month without the program saw the fuel-economy index dip to 21.9 mpg (10.7 L/100 km), more in line with the pre-Clunker trend.

The year finished up 3.3% to 22.2 mpg (10.6 L/100 km), compared with 2008’s 21.5 mpg (10.9 L/100 km).

Ward’s data also shows fourth-quarter production marked the best 3-month period of 2009 output, although a dearth of builds in the first half probably contributed more to the year-end uptick than Cash for Clunkers.

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