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Cash for Clunker means higher prices for most car shoppers
- On Thursday August 27, 2009, 5:20 am EDT
If you were one of the nearly 700,000 people who were able to cash in on the Cash for Clunkers program, congratulations, you probably got a good deal. On the other hand, if you bought a car without a clunker in the last month, you've overpaid.
Prices for cars during the Clunkers program went up for everyone, but buyers using the program on average got a $3000 benefit that others did not.
And if you absolutely have to buy a vehicle in the next two months, you'll most likely pay more.
It's a simple matter of supply and demand. The wildly successful Cash for Clunkers program has thrown things out of whack. For the next couple of months, usually peak car buying season, inventories will be low and car shoppers should expect higher prices and fewer choices, experts say.
The Clunker program came too late, said Jeremy Anwyl, CEO of the auto Web site Edmunds.com.
Had the program launched in February, when inventories were high and sales were at record lows, Cash for Clunkers could have helped fill a massive sales drop-off.
"They messed around with it for for so long the car industry was in an uptick, anyway," he said.
Already rising sales got kicked up too much, too fast, he said. Factories couldn't turn out cars fast enough to refill inventories that were emptied out so quickly.
This means dealers will now be faced with a drought of new models to sell, followed by a flood.
So if want a new car at a good price, hang on and spend the next two months picking out a good warm jacket.
Factories have already started churning out new cars to refill drained inventories. Look for prices to plummet in November and December after dealer showrooms have filled up ahead of what is traditionally the slack season for car sales.
While it seems that fewer shoppers want to buy cars now that the program is over, according to Edmunds.com, the drop in customers has been greatly outmatched by the drop in inventories.
Even before the program ended on Monday night, prices on popular models were being forced up.
Average dealer profits on the Ford Escape increased from about $1,200 before the start of the Clunkers program to more than $1,700 during the program, according to data from Edmunds.com. Dealer profits on the Toyota Corolla went from less than $400 to about $830. Average profits on minivans more than doubled from average of about $700 to almost $1,500.
For those with a qualifying Clunker to trade in, the program's benefits more than made up for the price jump. On average, Clunker owners got about $3,000 more for their trade-in vehicles than they would have otherwise.
"The Clunker owner did really well," said Anwyl. "Everyone else just paid more."
Prices will stay high for the next couple of months, Anwyl predicted.
Only those who are shopping for vehicles that didn't qualify for the Clunker's program, like big SUVs and luxury cars, may still be able to find some deals out there over the next few weeks, said Jesse Toprak, an analyst with the auto pricing Web site TrueCar.com.
"You're going to see some big SUVs discounted 20% to 30% off sticker price," he said.
As for the rest, patient shoppers will be rewarded. Big incentives and steep discounts will arrive in November and December, Anwyl said.
Net benefit to America: zero
