An interesting story in today’s USA Today suggested that prices for pre-owned vehicles could see a slight spike, since much of the “older inventory” is being absorbed by the Cash for Clunkers program.
Implications: New public policy (or private, for that matter) typically reveals a set of unintended consequences. The original goals for this program were to stimulate the automotive industry, and benefit the environment by offering incentives to junk a gas-guzzler and buy a more fuel-efficient alternative (among other things). It ran out of money quickly, and legislators had to pass additional funding about a week after the program launched. By those measures, the program could be argued as successful. (Of course, paying for the program is a matter of much discussion.)
The program has also had the effect, apparently, of reducing the number of pre-owned cars on the market. And as any good capitalist knows, when the supply goes down, prices tend to go up.
Also today, there was an Associated Press story in the Dallas Morning news about how charities that used vehicle donations to generate revenue are seeing a drop-off in contributions. In a volatile economy, it seems, the rebate of up to $4,500 on a Clunker is a little too much cash to part with.
I offer no opinion here as to the effectiveness or the side-effects of the CARS program. Only that it is having an impact… beyond that which may have been intended. Any policies like that in your company?
Mike Anderson
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