Cash for Clunkers Is Bankrupt

If this thing runs, it's eligible for Cash for Clunkers. (Photo: dave_7 [CC BY 2.0]/Flickr)

It’s not that surprising that the federal Cash for Clunkers program quickly ran out of money — just four days after it was announced, the $1 billion was gone. More than 250,000 consumers drove their old heaps to participating dealers and walked away (scratch that, drove away) with new cars that cost them up to $4,500 less. Geez, I saw it coming in my post July 23 — urging people to "act fast" — so where were Congress and the weighty White House auto experts?

The program was designed both to stimulate sagging auto sales (down from the dizzying heights of 16 million annually to less than 10 million) and to get polluters off the road. If your car is 14 years old or more, it produces a whopping 19 times more tailpipe pollution than a car 2004 or newer.

The program (formally known as CARS) worked just as it was intended, but the money hadn't a prayer of lasting until the announced closing date of Oct. 31. Congress, when it cut funding from $4 to $1 billion, should have seen this coming. After all, a Hyundai Accent with a Cash for Clunkers voucher and existing dealer incentives cost just $6,600. By trading in an old Chevy Astro van, a customer ended up saving $6,000 on a new base model Dodge Caliber. Who doesn’t want deals like this?

The House voted today by a lopsided margin, 316-109, to add another $2 billion into the program. The Senate will vote next week, and there are reportedly still some sticking points. As expected, Michigan’s lawmakers want more lenient rules on gas guzzlers, making it easier to sell made-in Detroit vehicles.

One Congressman I talked to, Jim Hymes (D-Conn.), agreed that this new funding is unlikely to keep the program going for long, and that Congress may not vote for a third appropriation — but he was certainly appreciative of the program’s stimulus effect on car sales. The National Automobile Dealers Association estimates a 25 percent boost in new car volumes in just the last week.