Many industry observers have questioned the helpfulness of the federal “Cash for Clunkers” program on the grounds it that it merely accelerated new car purchases by individuals who would have purchased cars anyway. It’s worth pointing out that, even if every single new car purchase were such an accelerated purchase, it would likely still have significant value for dealerships merely by giving them much-needed cash now. That whole time value of money thing.
But, there’s also new data, in the form of a Cars.com survey, that 30% of the program’s transactions were not accelerated purchases. Rather, they were purchases by consumers who previously had no intention of buying a new car but saw deals that were “too good to pass up.”
(Note: this post is neither an argument for or against the fairness of a targeted stimulus for dealerships. We feel it’s important to assess the effectiveness of the clunkers program, fair or not, as it had a meaningful impact on dealerships and, indirectly, service centers.)