Cash 4 Clunkers - how much left in the til?

My dealer is claiming that $3bn has already been spent, but considering the fact that they don't even know the current regulations, I'm pretty sure they are talking out of their a$$es. So much for the advantage of dealing with the largest dealer in the state...

I have also read that C4Cs will be accepted through tomorrow (assuming no more dough), but my dealership won't do anything at this point.

 

White House says it will shut down Friday if the Senate doesn't pass the 2 billion.
The Senate leaves on vacation after Friday, the House is already gone.

 

There are 23000 dealers involved in C4C - at $1B that averages out to approximately 12.5 cars per dealer. (assuming some mix of $3500 and $4500 deals). This appears to be the number that the dealers were told to expect between last Monday and November 1.

Of the 8 different dealers that I have been to as of last weekend, they had done between 38 and 70 deals. So assuming that holds across the country - the program has already exceed the $3B mark. The dealers I visited were in two different states and in very small towns and very big towns - a real cross section. I was really surprised that a dealer in a town of 15,000 people had done 38 C4C deals!

As of tonight, it sounds like the Senate may actually pass the extra $2B to match the House - Feinstein has decided to support the bill. But even with the extra $2B, it is unlikely that the program will continue much longer as it appears that even that new money is more then spent.

What happens to the dealers who take deals while the program is still in place, but after the money runs out? Sounds like the gov't is going to have to back fill the program after close-out to make sure all of those dealers get paid. A week after the program started, the accounting is already 5 days behind. Dealers around here are now doing C4C deals, writing up all of the paperwork, etc. but not letting you take the new car. The new car and the clunker sit on the lot until the deal is officially approved by the CARS program. This also seems to be taking at least 4-5 days (maybe more, as deals still haven't been approved after 4 days).

It's unlikely that the program will be "suspended" while the gov't debates on what to do. That would bring auto sales to a screeching halt while people wait to see if they can get the $4500 two or three months from now. (Congress is out until September, and then a few weeks of debate and reconciliation to get a new bill passed) And as far as the auto companies go - they have to make some decisions about how many cars they want to put back on dealer lots. Without an extended C4C program, they would likely put out fewer cars until the economy shows some real signs of turn around. Many have already cut way back on production - will they use the current workflow and workforce to replenish the inventory, or would the ramp up production to restock faster?

Bottom line - if I were a betting man I'd bet that you have somewhere between a couple of days and a couple of weeks to take advantage of the program.

 

Very good analysis. You could be right. We'll just have to wait and see.

As a stimulus package, this was a very good idea. It got the stalled automobile industry going again. Unfortunately it appears that the government did not set-up the program to adequately handle the volume of activity. (Nor did the government have the money set aside to fund the program.) In my opinion, they've overpaid. I would have offered a maximum of $ 3500 instead of $4500 max.

In a balanced market, there is adequate supply of product to meet demand. Consequently, negotiations between a buyer and seller typically result in a deal that is considered fair by both parties. However this government program has created such a high demand where there is not enough supply that there are an unusual number of complaints by prospective buyers that some dealers are attempting to gouge customers because this program may end soon.

Keith

 

Hello Lake!
I wanted to remark on two points.
1. I'm sure some brands would go back to the screeching halt as you describe, but Toyota's actually been doing fine. What the C4C has done is clear out some older stock, completely wipe out the small car stock like Yaris, Corolla, and inexpensive SUVs and small trucks ... and essentially create a madhouse rush for Prius. It's also halted used car sales to folks who would normally seek out used who can suddenly do NEW because their old car's worth a bundle against a new car versus a used. We are seeing folks who would have settled for a used vehicle or been searching a private party sale situation come out of the woodwork for new. It's shifted things.

2. I give this program 72 more hours tops. We've done at least 100 C4C deals, but we've also done a few dozen that are not C4C. The C4C deals could have been used car deals too. And, I am also seeing folks who already know what they wanted to the T - meaning they were already searching for a new car... many would have bought anyway and have admitted that the C4C allowed them to get a BETTER version or a NICER model than what they originally planned. And, it may be geography, but 7 in 10 C4C buyers are paying cash for their new cars after the C4C money credit. Think about that one.

 

Agree.
IMHO, we should have had three levels.
Going up 6-10 = $2500.
11-20 = $3500.
21-more = $4500.

 

HI Dianne,

Those numbers make a lot of sense to me.

Thanks,

Keith

 

I agree the lowest gain should be 7-10, rather than just 4 (to prevent more pickups on the road). Still, 21+ you are basically forcing someone to get a hybrid.

 

The big remaining Q is the return on investment, i.e. the fuel
saved by all those new vehicles over X amount of time returning
more than the $3 bil or however much gets plowed into it. If
the package also came with strong advice on better driving style,
that ROI curve would be *much* steeper. Mechanical efficiency
is only part of the overall picture; the light bulbs in question
have got to *want* to change to really bring the intent home.
.
_H*

 

LakePrius, You have provided a good analysis of the situation. I think your conclusion is overly generous: I suspect the additional $2 Billion in funding won't last for weeks. The additional funding may have already been spent, so a buyer might have only hours or a day to get their paperwork submitted.

The challenge I see, is that the White House is telling consumers and dealers that deals in the pipeline will be honored; but the Senate hasn't approved the additional $2 Billion in funding. The White House can only spend what the legislature approves, so how will deals in the pipeline be approved, especially if the Senate attaches different, or additional, conditions to deals made under the additional $2 Billion? --TK