Cash for Clunkers a net gain for Dealers

Mar 10, 2010•Automotive• Blog Posts• by Michelle

Short term boost with a long term price?

That’s what some critics of the federal government’s Cash for Clunkers program predicted would be the outcome – that the short term boost in volume would cannabalize future sales.

Not so, according to a study released this week by Maritz Automotive Research Group. In fact, the study indicated, not only did the program create significantly more incremental sales than previously estimated, but it did so without negatively impacting future sales.

The group surveyed nearly 36,000 consumers who purchased a car while the Car Allowance Rebate System (CARS) was active in July and August 2009.

Previous reports on the Cash for Clunkers program estimated incremental sales somewhere between 125,000 and 346,000 vehicles. The new Maritz report, however, estimates that dealers made 542,000 incremental new vehicle sales as a result of the initiative.

“Our findings not only provide strong evidence that many more vehicles were sold as a direct result of the incentive program than were previously estimated,” said Dave Fish, PhD, vice president of the Maritz Automotive Research Group, “but they also largely debunk the myth that Cash for Clunkers mortgaged future car and truck sales.”

“In fact,” Fish said, “the program resulted in sales of vehicles to people who don’t normally buy them.”

Government records published on www.CARS.gov indicated 677,000 vehicles qualified as CARS transactions.

The Maritz report analyzed consumers who acquired a new vehicle (CARS and non-CARS participants) and found that only 4% of program participants would have still purchased or leased a new vehicle without the incentive, and 13% intended to take advantage of the incentive but did not qualify. Thirty-one percent took advantage of the incentive rebate specifically because of the CARS program, and 52% did not participate in CARS and never intended to.

Maritz also estimated that an additional 233,000 vehicles sold in July and August 2009 were purchased by consumers who wanted to participate in CARS, but did not qualify, yet they purchased or leased a new vehicle anyway.

“The ‘halo sales’ of 223,000 vehicles were an added bonus to the already solid results produced by the CARS program,” Fish said.

And while sales did dip slightly in September 2009, likely due to a dealer shortage of inventory, statistics from the US Department of Commerce’s Bureau of Economic Analysis showed a Seasonally Adjusted Annual Rate of sales from October through December 2009 were at a higher pace than before the CARS program was implemented.

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What has been your experience with Cash for Clunkers? How did your sales do? Share your experiences and observations in the comments.