Consumers Catch Clunker-mania

It is hard to judge the success of an effort after its first few days, but if the initial results are any indication, the Car Allowance Rebate System (CARS 2009) -- more commonly known as Cash for Clunkers -- is a certified hit. It has created huge amounts of traffic on third-party Web sites and manufacturer Web sites, and most important, in dealer showrooms. In addition, it has also proven to be the impetus for incremental sales, something the auto industry is in desperate need of as it tries to keep the wolves from the door. The important question remaining to be answered is one that can be expressed in movie box-office terms: Does it have “legs”?

It is too early to tell, but it’s hard to argue against the first-blush results of the federally sponsored program. Spurred by an unprecedented amount of advertising and marketing efforts from car manufacturers struggling to get potential buyers off the couch, the CARS 2009 program has resulted in a flood of inquiries and a strong stream of traffic. Early results also indicate that many of the consumers taking part in the program are not typical new-car buyers, which means the sales “were not going to happen anyway” -- one criticism of the program. Many of the vehicles that came in during the first full weekend of the effort were not-so-Golden Oldies from the previous millennium. One can presume that current owners/drivers of a 1996 Ford Explorer, 1995 Dodge Ramcharger or 1991 Jaguar XJS would not be prime candidates for new-car ownership given other circumstances, but there they were, waiting for their piece of the government pie as the program drew its opening breaths.

One person who was not surprised by the initial rush of clunker people was Rae Tyson, a key spokesperson for the National Highway Traffic Safety Administration, which has been charged with administering the CARS program. “I have to admit, we kind of expected this,” he told us. “In the process of setting up this program, we spoke frequently with our opposite numbers in Germany, where they have recently instituted a similar program, and when their program launched, it pretty much tied up the Internet for several hours.”

Tyson also predicts that the program’s $1 billion in government funding will run out well before November 1, the sunset date set by Congress.

“I wouldn’t panic right now,” he said. “You don’t have to run out and buy a car this weekend, but I would keep an eye on how much money is left in the program, and that’s something you can do on our Cars (.gov) Web site.”

So the signs that the CARS 2009 program will move the needle in a positive way are unmistakable. One underreported aspect of the program and the media hype surrounding it is that consumers are excited about buying cars again. In retrospect, the consumers who don’t qualify for the program may be as important as those who do. Why? Because consumers who get the car-buying bug do research on the Web and go into showrooms, and they are likely candidates to buy a new vehicle even if they find they don’t have a qualifying clunker. Sure, there is the chance that the buildup to the CARS 2009 announcement has led to a deluge of interest that won’t be sustained for the length of the program. But right now, the program is a very welcome breath of new life in the car industry.