After The (Fender) Bender

Comes the hangover. Car dealers are bracing for the hangover after their taxpayer-funded sales bender. Sales of automobiles are expected to plummet now that the cash for clunkers spigot has been turned off.

After the heady rush of Clunkers sales, the return to normal — especially in a market where “normal” means deeply depressed — may be difficult to deal with.

“I think you’re going to be able to shoot a cannon through here and not hurt anybody,” Tonkin said.

In the short run, dealers will see sales drop precipitously, said Jeremy Anwyl, CEO of the auto Web site Edmunds.com.

“I think we’re going to see a decline of about 40% in the immediate aftermath,” he said.

That would take sales down to where they were in May, lower than they were in the month or two just before the program started.

In the long run, this program may actually lead to lower prices on cars, which may not necessarily be good news for dealers or car makers (although consumers will be happy). Back when rebates were first introduced, buyers became used to them and expected them. So it may be with this incentive program.

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One Response to After The (Fender) Bender

  1. feeblemind says:

    I think it was Karl Denninger that had a post on this. Buyers have been surprised to find out that the $4500 is taxable income. In effect, you are selling your clunker for $4500. In addition, sales tax is usually calculated on the value of the new car minus the trade. No trade-in here so there is additional sales tax to be paid as well. So maybe a lot of people stampeded into a program that has only marginal benefits for the buyer??

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