September 20, 2009

First Cars, Then Houses?

Although it was obvious from the start that the cash-for-clunkers program would not live up to the promises of proponents, hard evidence is beginning to trickle in that the pessimists were right. Instead of priming the pump for a self-sustaining recovery in the beleaguered auto sector (or the economy at large), the initiative simply borrowed sales from the future. Now that the government is no longer throwing free money at buyers, Automotive News reports in "September Sales Rate Will Tie Lowest on Record, Edmunds Says," the bottom has fallen out:

Edmunds’ SAAR of 8.8 million would be lowest in nearly 28 years

September’s light-vehicle sales rate will fall to 8.8 million units, consumer auto site Edmunds.com said. That would be the lowest rate in nearly 28 years, tying the worst demand on record.

After the cash-for-clunkers program boosted August sales to their first year-over-year increase since October 2007, demand has plunged. In at least the last 33 years, the U.S. seasonally adjusted annual rate has only dropped as low as 8.8 million units once -- in December 1981 -- with records stretching back to January 1976.

Amid a global recession, U.S. sales fell to 13.2 million units in 2008, from 16.2 million in 2007. The slide continued, with demand ranging from 9.1 million to 9.9 million in the first half of this year.

End of clunkers

But the cash-for-clunkers program’s official run from July 24 to Aug. 24 bumped the sales rate to 11.1 million in July and 13.7 million in August.

Now that consumers can’t receive $3,500 to $4,500 for trading in gas guzzlers for new vehicles with better fuel efficiency, they aren’t rushing to purchase vehicles, Edmunds.com analysts said.

“Many people regard February as the darkest month of the recession, but even then the SAAR was higher, at 9.1 million units,â€