How is "Cash for Clunkers" Affecting Those it Was Supposed to Help?
The government's Car Allowance Rebate System (CARS), more commonly known as the "Cash for Clunkers" program was instituted in July of 2009. Cash for Clunkers was designed to encourage U.S. Residents to trade in older, less fuel-efficient vehicles and purchase newer, cleaner vehicles. The Cash for Clunkers program can be considered by many to have been hugely successful. By offering prospective buyers financial incentives up to $4,500 per person, the program resulted in the sale of more than 700,000 new vehicles.
But how are the Cash for Clunkers buyers doing now that their cars have been traded in and their monthly car payments are coming due? Many believe that the answer to that question is not very well. Evaluations of the aftermath of the program are yielding unsettling information. Some say that as many as 1 in 4 Cash for Clunkers buyers are now experiencing buyer's remorse.
Cash for Clunkers successfully convinced thousands of people that the time was right to buy a new car. After all, were they not being offered what was essentially a hefty discount on a new car? The limited time only deal even managed to convince a good deal of people who did not qualify for the program for one reason or another that they should get themselves a new ride.
Unfortunately, many of the people who pounced on the dazzling discounts offered by the Cash for Clunkers program landed in a load of new debt which they were unprepared to shoulder. These people are just now beginning to realize that while their old cars were certainly not the most attractive rides on the road, and although these old cars undeniably were not exceedingly environmentally friendly, they did have one important thing going for them: they were paid off. The so-called clunkers cost their owners almost nothing to own. Now that the sales have been finalized and the monthly payments are coming due, many drivers are remembering why they held on to their old cars for so long.
Additionally, while the vehicle sales market certainly experienced a boost in sales while Cash for Clunkers was in effect, many believe that the program created a bubble in the car market that will ultimately prove detrimental to both car dealers and consumers. Demand for cars sky-rocketed in response to the Cash for Clunkers program, causing the price of cars to rise as well. Although those who qualified for the program's incentives were receiving a large discount, they were buying cars in an inflated market and in the end may not have been getting the best deal possible.
Now, after the intoxicating effects of big discounts have worn off, the demand for cars has taken a dive. As a result the price and value of cars have dipped, too. Cash for Clunkers generated a lot of economic activity in short amount of time, but in the end many are left right back where they were before the program's inception: consumers have too much debt and businesses have too few customers.
