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Cash for Clunkers: effect on used car market


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August Kelley Blue Book Market Report Offers Forecast of Used-Car Industry After Cash for Clunkers

IRVINE, Calif., Aug. 7 /PRNewswire/ -- Kelley Blue Book, www.kbb.com, the leading provider of new car and used car information, today reveals possible effects of the Cash for Clunkers program on the used-car industry as reported in the company's August 2009 Blue Book Market Report. As dealers and consumers continue to take advantage of this program, Kelley Blue Book analysts forecast a likely bubble in used-car values, which could deflate as the Cash for Clunkers program comes to a close.

With $1 billion spent and more than 250,000 new vehicles sold, the success of the Cash for Clunkers program cannot be argued. With more than 250,000 vehicles leaving the used-vehicle supply, this equates to a 0.8 percent reduction in the overall supply of used vehicles (based upon sales of 16 million used vehicles in 2008). When the Senate signs off on an additional $2 billion funding for the Cash for Clunkers program later today, it could equate to an additional 500,000 used cars being removed from the overall used-vehicle supply, which is a 2 percent overall reduction in supply this year alone. With a total of 750,000 vehicles being removed from the marketplace, dealers are stocking up on used inventory in anticipation of low supply and high demand. This scenario is driving used-car prices up significantly in the short term, causing a bubble in values that will seriously impact used-vehicle values when the Cash for Clunkers program ends.

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Bruce

2016 Cadillac ATS-V gray/black

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Looks like if you want a USED CAR...wait a little while, till the clunkers program ENDS...the market will crash, and you can then get a "REAL GOOD" deal. :D

That is, assuming that you CAN wait.

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Watch the new car market dry up when it's over as well.

Agreed.

All this program did was PULL AHEAD buyers that would have bought anyway.

A lot of them were not planning on buying "RIGHT NOW" but with the $4,500 being waved in their face, (That you and I are funding), they bought "NOW."

That is going to create a huge "SLUMP" when the program ends further messing up the recovery of the auto industry.

I am also wondering if there is going to be a huge SPIKE in repo's, about 8 to 12 months from now.

My guess is, a lot of people bought more car than they can afford.

I am kinda planning on getting a CPO next winter (2010) after the 2011's come out.

With all the rebates and the $4,500 incentive, "IF" I had a "CLUNKER" (which I don't)...I would have seriously considered getting a NEW ONE now.

It wouldn't have cost much more than a CPO later on.

I figured it up...on a new DTS, there would have been about $12,000 or "MORE" off sticker on a new DTS.

A new car for a used car price.

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    From "The Casey Report:"

    Cash for Clunkers: Real stimulus

    CNN Headline: The boost to auto sales caused by the government trade-in program should lead to increased production from Detroit. That would have a big ripple effect.

"Here we see by far the most common of all economic fallacies – the fallacy from which many others stem. It is the fallacy of overlooking secondary consequences, also known as "The Broken Window Fallacy."

"To quote Henry Hazlitt's Economics in One Lesson:

    Let us begin with the simplest illustration possible: let us, emulating Bastiat, choose a broken pane of glass.

    A young hoodlum, say, heaves a brick through the window of a baker's shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.

    Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $50 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.

    The glazier's gain of business, in short, is merely the tailor's loss of business. No new "employment" has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.

"So it is with the aforementioned "Cash for Clunkers" program. What is seen is people trading in old cars and buying new ones. What is unseen is the lost business that will never take place because wealth has been transferred from taxpayers to car buyers. The money taken from taxpayers can't be used for other things.

"As an aside, I want to point out how appropriate the title to this piece is. You see, the "Cash for Clunkers" program requires that trade-ins be scrapped – literally breaking windows everywhere.

"And that, dear readers, is that for this week. David will be back with you on Monday. In the meantime, thank you for reading and for being a subscriber to a Casey Research service."

Chris Wood

Casey Research, LLC

See: www.Caseyresearch.com

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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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It's also worth pointing out that our government is borrowing money with the expressed purpose of paying taxpayers to DESTROY societal wealth. Those $4500 cars will no longer be available for purchase by "poor" people.

I guess the "poor" will now have to purchase $5,000 vehicles.

Someone please, protect me from my government.

Oh, I forgot, that's my job.

I hope you'll join me . . .

Regards,

Warren

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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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Lets be careful with what we say here, you will be reported to the presidential watch dog web site for doubting your government

http://www.stoptheaclu.com/2009/08/04/whit...care-advocates/

Pre-1995 - DTC codes OBD1  >>

1996 and newer - DTC codes OBD2 >> https://www.obd-codes.com/trouble_codes/gm/obd_codes.htm

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Lets be careful with what we say here, you will be reported to the presidential watch dog web site for doubting your government

http://www.stoptheaclu.com/2009/08/04/whit...care-advocates/

OBAMA! is a Chicago Thug Politician!

There, I was careful to spell that correctly:

THUG.

POLITICIAN.

CHICAGO.

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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises

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