) -- It's no secret auto sales will surge in August, thanks to Cash for Clunkers. The real questions involve the extent to which sales were pulled ahead from September and later months, and whether the program justified its $3 billion cost.
Cash for Clunkers "was an artificial external stimulant for the industry, like giving somebody an injection of cortisone, and August numbers will be artificially high," says independent auto industry analyst Tom Libby. "There will be a payback, but I don't think anybody knows how big it will be."
The government program was approved July 24 and ended a month later, although the deadline for dealers to file for repayment was extended to 8 p.m. Tuesday because the government, like the dealers, has been overwhelmed by the consumer response.
Dealers submitted 690,114 vehicles for a total of $2.88 billion in rebates by the deadline, just below the $3 billion budget for the program, according to figures released by the Department of Transportation Wednesday.
Congress provided incentives of $3,500 to $4,500 to buyers. Backers say the effort helped to jump-start the economy; critics say it meant spending billions to move ahead sales that likely would have taken place anyway.
Given that sales will likely fall back dramatically next month, was Cash for Clunkers a success?
George Pipas, sales analyst for
, remains enthusiastic, saying the program accomplished its goal. "Nobody ever viewed this as anything more than a temporary stimulus to try to kick-start the economy," he says. "That mission has been accomplished."
"It pulled some sales ahead, but it also made some sales that were postponed become a reality," says Jesse Toprak, vice president of industry trends for Santa Monica, Calif.-based TrueCar.com, a newly formed aggregator of vehicle sales-price information.
"We had been dealing with postponement decisions for a year or so at least, due to the economy, so it made some buyers who were indecisive go out and buy a car," Toprak says. The number of sales pulled forward by Cash for Clunkers will not be as significant as the number pulled ahead by promotions like employee pricing, he says.
Moreover, now that the program has restored enthusiasm to car-buying, manufacturers likely will provide incentives in an effort to sustain it, Toprak says. He estimates August domestic vehicle sales will exceed one million, pulling the seasonally adjusted annual rate above 12 million before it falls back to the low 10 million range in September and finishes the year around 10.5 million.
That would be the lowest sales level and the first time below 12 million since 1982, when sales totaled 10.4 million, according to J.D. Power. In other words, despite Cash for Clunkers, 2009 is going to be a miserable year for auto sales.
Even though Ford recently announced a production increase, Pipas says the company is fully aware that auto sales will drop off in September "and perhaps in October as well (because) the economy is not strong enough to sustain the level of sales we've seen in the last four weeks."
Nevertheless, he says, Cash for Clunkers benefitted the economy as consumers spent money that went to manufacturers, dealers and suppliers. "That has a ripple effect," he says.
Libby says some Cash for Clunkers buyers took advantage of the opportunity to get rid of older gas guzzlers -- they may not have bought otherwise -- while some visited showrooms and ended up buying outside the program. In general, however, sales were pulled ahead from future months, raising the question whether the program offered any true benefit, he says.
As far as trying to determine whether the automobile economy is actually improving, August numbers obviously aren't going to mean very much. Libby suggests waiting for September to end, then averaging August and September numbers and comparing them with numbers for June -- before Cash for Clunkers began. "Only then will you be able to see the real rate of improvement," he says.
-- Written by Ted Reed in Charlotte, N.C.