Worth an Encore in 2010?

The nightly news and the nation’s headlines trumpeted the spike of increased sales volume at America’s auto dealerships this summer thanks for the Consumer Assistance to Recycle and Save (CARS) Act of 2009, a key component of the U.S. governments economic stimulus program. The numbers were bold and exciting – $3 billion invested, and 690,000 fuel-guzzling cars traded in for more efficient and eco-friendly new cars. Lenders benefited, tax revenue was generated, dealers saw more customers, and most importantly, automakers got a quick infusion of sales to help them negotiate the difficult down economy, at a time when Michigan was enduring the nation’s highest unemployment rates and GM was navigating bankruptcy.CARS, also known by its trendier moniker Cash for Clunkers, was an expensive emergency solution to an economic crisis that the country was facing, and the program may have helped achieved its main goals: the economy did not sink into a deep depression, and hundreds of thousands of inefficient cars and trucks were taken off the road. Cash For Cars Sydney

With a crisis averted, it’s a good time to consider whether another round of CARS Act investment could be practical to help the economy. Fiscally speaking, the facts wouldn’t support an encore performance of Cash for Clunkers. Proponents of the CARS Act know its benefits extend beyond the numbers to environmental gains and increased consumer confidence. But there are many reasons why the CARS Act shouldn’t be repeated anytime soon based on economic factors. First of all, industry analysis of the CARS Act’s impact demonstrate that the program truly added only 125,000 incremental car sales in 2009, or sales to people who wouldn’t have purchased a car at all in 2009. The remaining 565,000 automobiles purchased under the program were planned anyway, based on an analysis of automaker run rates by automotive research firm Edmunds. While the CARS Act may have inspired additional sales at a time when the economy needed the boost, the vast majority of sales would have come about in due course in 2009. In a down economy, the CARS Act created incentive and opportunity to buy new rather than drive older, less-efficient cars. The CARS Act also created extra incentive for buyers to consider fuel efficient cars.