Study says 'Cash for clunkers' impact was underestimated

Kansas City StarMarch 10, 2010 

Search online for "Cash for Clunkers," and here's one thing you'll find: stories about its negligible overall impact on the economy.

Wrong, says Maritz Automotive Research Group. The Toledo, Ohio, independent automotive research company recently surveyed participants in last summer’s federal program designed to stimulate new-car sales and get gas-guzzlers off the road. On Tuesday, the company shared its results.

One key finding: 90 percent of those participating in Cash for Clunkers said they would not otherwise have bought a new car.

According to federal government data, 677,000 purchases were made through Cash for Clunkers from late July through August. Maritz’s research showed that 542,000 were incremental new car or truck sales, meaning those purchases would not have occurred without the incentives. Previous estimates by industry analysts put the incremental sales figure between 125,000 and 346,000.

The government’s Car Allowance Rebate System, or CARS, offered vouchers of $3,500 or $4,500 to owners of older, gas-guzzling vehicles who traded them in for new, fuel-efficient models. The program, which was expected to last several months, was so popular that it ran out of its $3 billion in funding in two months.

“Our findings not only provide strong evidence that many more vehicles were sold as a direct result of the incentive program than were previously estimated, but they also debunk the myth that Cash for Clunkers mortgaged future car and truck sales,” said Dave Fish, a Maritz vice president. “In fact, the program resulted in sales of vehicles to people who don’t normally buy them.”

While auto sales dipped in September after Cash for Clunkers ended, Maritz noted that the most likely reason was a shortage of vehicles on dealer lots. After seasonal adjustments, monthly auto sales from October to December showed higher rates than before Cash for Clunkers started.

Cash for Clunkers brought additional people into the new-car market — those who normally buy used cars, Fish said.

Maritz’s study did not change minds at Edmunds.com, the popular car buying Web site that analyzed Cash for Clunkers sales last year. Edmunds.com estimated only 125,000 incremental sales from the program.

Edmunds.com chief executive Jeremy Anwyl said his firm examined auto sales data and patterns from last year, while Maritz surveyed consumers.

“I think what’s missing from their study is what would have happened without Cash for Clunkers,” he said.

Automakers often try to generate summer sales with big discounts and zero-percent financing.

“Last year, the government did that for them,” Anwyl said.

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