Auto Sales Plummet After Cash For Clunkers

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After a booming August, auto sales collapsed in September. Dealers call it the Cash for Clunkers hangover. They say there are two main reasons for the numbers: The government incentives encouraged some buyers to pull their purchases forward. The other reason: Cash for Clunkers was so popular that when September rolled around, many dealers didn't have enough cars on their lots to meet customers' needs.


Cash for Clunkers made August boom time for auto sales. And the end of Cash for Clunkers brought the increase in sales to a clunking halt. General Motors, Ford and Chrysler all say September sales were down more than 30 percent from August. As NPR's Frank Langfitt reports, those numbers are raising new questions about the program's effectiveness.

Unidentified Woman: The Cash for Clunkers Program lit a fire under car sales last week.

President BARACK OBAMA: It has been successful beyond anybody's imagination.

Unidentified Man: A group of lawmakers scrambling to refuel the Cash for Clunkers Program before Congress takes its summer break.

FRANK LANGFITT: Cash for Clunkers was a sales phenomenon. Government incentives of up to $4,500 sent bargain hunters rushing to car lots in July and August. All told, nearly 700,000 vehicles were sold under the program. Now, dealers are paying a price.

Mr. ALAN SPENCER(ph) (Car Dealership Owner): September's going to be probably the worse month of the year as a result of what they commonly refer to as Cash for Clunkers hangover.

LANGFITT: Alan Spencer owns 24 dealerships in Ohio, Pennsylvania and Florida. He says one reason sales slumped last month is because Clunkers pulled in shoppers who would have bought later in the year anyway.

Mr. SPENCER: They pushed business ahead from people that would have traded in their clunkers in September, possibly in October and November, and shoved that business into August. So it obviously, by definition, takes away from, you know, the business in the future.

LANGFITT: Spencer thinks those buyers made up anywhere from 20 percent to half of his clunker business. Another reason for the steep drop in September sales: Cash for Clunkers wiped out dealer inventories, so when shoppers showed up last month, there wasn't much to buy.

Ms. TAMMY DARVISH (Vice President, DARCARS Automotive Group): Most of our lots were completely empty. I had lots in some of our dealerships with literally seven cars left in the inventory.

LANGFITT: That's Tammy Darvish. She's an executive with DARCARS Automotive, one of the top dealers in the Washington, D.C., area. Even with last month's drop-off, Darvish thinks Cash for Clunkers was good for dealers.

Ms. DARVISH: It created a lot of traffic in our showrooms. It excited the employees. It got them focused again on, you know, things turning around.

LANGFITT: But she doesn't think it was so good for the Detroit car companies it was designed to help. Darvish says most of her customers traded in American clunkers for foreign cars. She says that will come back to haunt Detroit.

Ms. DARVISH: When these customers get back into the trade cycle again, they're not going to go back to a Detroit domestic vehicle. Take Toyota, for example. I mean, their loyalty is almost 80 percent. So we know that at least 80 percent of those customers will end up staying in a Toyota product.

LANGFITT: So do you think Cash for Clunkers actually helped General Motors and Chrysler?

Ms. DARVISH: Oh, absolutely not.

LANGFITT: Well, there was one good thing.

Ms. DARVISH: They got rid of a whole bunch of old product that have been sitting around for a while.

LANGFITT: And moving those Detroit cars off dealer lots helped put thousands of autoworkers back on the job. Analysts say that judging from the buying frenzy, the government incentives were higher than needed.

Jeremy Anwyl runs, the car consumer Web site.

Mr. JEREMY ANWYL (Chief Executive Officer, The right way to do this would have not been to have had a $3,500 or a $4,500 incentive, but maybe to have, you know, even half that. Whenever you get in and start, sort of distorting the marketplace, there's all kinds of unintended consequences, and many of them are not positive.

LANGFITT: A month after Cash for Clunkers, the auto business finds itself, in some ways, back where it started. Analysts say that extended across 12 months, those weak September sales would amount to less than nine-and-a-half billion sales annually. That's the lowest level since April and down dramatically from the industry's glory days earlier this decade, when annual sales were around 17 million.

Frank Langfitt, NPR News, Washington.

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