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‘Cash for Clunkers’ Comments and Questions

Posted by Larry Doyle on July 31, 2009 2:51 PM |

Uncle Sam just spent $1 billion via the “Cash for Clunkers” program over a 4 day time frame. Given the speed of that burn rate, The Wall Street Journal reports, House Votes to Extend ‘Clunkers’ Program.

A few questions and comments:

1. The National Highway Traffic Safety Administration is overseeing the disbursement of these funds. Think there may be a chance of some kickbacks or fraud going on here? Who is checking?

2. Assuming the average list price of the fuel efficient vehicles being sold is $20k, the subsidy of upwards of $4500 is approximately a 20% discount. Is this a true reflection of latent demand or partially a reflection of consumers responding to a gift?

3. What does this program do to the used car market? If I am in the market for a used car, my bid just went down at least 10% if not more.

4. How does this program affect the less fuel efficient car market? Does it strip demand away from that segment?

5. If there is such demand for the Cash for Clunkers program, should there be further restrictions on who may be able to benefit from this program going forward?

6. Given the speed with which the initial $1 billion was utilized, do you think there is a chance car dealers are working other deals with customers?

Not to be overly cynical, but as an industry car dealers do not exactly enjoy the best reputation. As such, while Congress can approve more funds, I would like to see a thorough audit of this program prior to the actual allocation of those funds.

Thoughts and comments welcome.

LD






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