A 'cash for clunkers' frenzy
Posted
Jul 31 2009, 12:00 PM
by
Kim Peterson
Rating:
One stimulus package that worked, perhaps a little too well, was the government's "cash for clunkers" program. Congress set aside $1 billion to fund the project for several months.
But now, just a week old, cash for clunkers has used up nearly all that money. Washington was shocked by the news Thursday night, and is scrambling to figure out what to do next.
Here's how the program works: People who trade in their gas guzzlers for more environmentally-friendly cars get rebates worth as much as $4,500. Trade-in cars have to get 18 miles per gallon or less to qualify. (More info on the program is here).
Cash for clunkers was designed to give the auto industry a boost through Nov. 1, or until the money ran out. But the program was too popular; tens of thousands of people have already used it to buy new cars.
"It was an absolute success," the chief executive of auto dealership company AutoNation told The Wall Street Journal. "There's a very compelling case the government should put more money into it. It's a great stimulus to the economy."
The House approved an emergency vote Friday on funneling another $2 billion into the program. The money will come from stimulus funds that were supposed to go to energy loan guarantees, The Washington Post reports. But even if the money comes through, car buyers will blow through that amount at a pretty rapid pace.
One New York Honda dealership stayed open until the wee hours of the morning Friday, making sales past midnight as people worried cash for clunkers would soon be suspended.
One down side to the buying frenzy is that it could hurt sales at auto parts dealers like AutoZone (AZO). The parts seller has been doing a killer business in the downturn as people held on to their cars for longer, choosing to fix them up instead of trading them in for a new model.
At the time of this writing, Kim Peterson did not own shares of AutoZone in personal or client portfolios.
Photo credit: Trekphiler, Creative Commons attribution 3.0 unported license
Related reading:
'Cash for clunkers' off to a hot start
Could your clunker bring you $4,500?
Cash in on the ‘clunker' bill
Keep your old clunker or buy a new car?