'Cash for clunkers' ends. Did it do any good?

This Edsel is cheap enough to qualify for a "clunker" trade-in – the finger-written price in its back windshield dust places its value at $2,750. But it's too old: Edsels went extinct in 1959 and are widely regarded as one of the auto industry's biggest flops.

When sales under the wildly popular “cash for clunkers” program end tonight at 8 p.m. EDT, will car buying go the way of the Edsel?

“I don’t think there will be much stimulus that lives on,” says Mark Vitner, a senior economist at Wells Fargo. In August, car sales roared back to life because of the showroom interest generated by "cash for clunkers." Mr. Vitner estimates this month's sales will reach an annual rate of 16.2 million. more modestly put that around 13 million – that in an industry that had struggled during the year to break the 10 million mark.

In response, automakers boosted production to refill depleted inventories of certain fuel-efficient models that were popular trade-ins. They almost doubled production from 4.3 million vehicles in the second quarter to about 8 million in this quarter, according to the San Diego Union-Tribune. That’s starting from a second quarter baseline of almost “nonexistent” production, says Jessica Caldwell, an analyst with automotive information company Still, any boost in production is significant, considering what a sorry year it’s been for automakers.

Now, expect the industry to stall. By pulling forward sales that would have taken place anyway, the program has added volatility but not much oomph. Ms. Caldwell and other analysts predict several months of struggling car sales ahead.

“It’s kind of a vicious cycle,” she says.

Whether the plum government rebate – up to $4,500 to trade in a gas guzzler that's worth less than that – actually generated new demand for cars is unclear. Vitner says the program likely led car buyers who would have opted to buy a cheaper used vehicle to bump up to a shinier new one. But he adds that a clunker owner is more likely to be the driver who keeps the same car for a long time – which means some of those consumers will now be off the market for years.

Consumers with a new car monthly car payment can also be expected to back off other retail spending, says Vitner, who expects "clunker" deals to take from back-to-school spending.

The "clunker" stimulus will continue to help scrapyards that dismantle the vehicles. They will resell the reusable parts from the clunkers that have received their final fill-up. But that’s about it for any trickle down from the stimulus.

“I think we’ve seen over the past year that… people needed some sort of handout before they’ve going to act,” Caldwell says.

That's coming, but in different form. The government announced last week a “cash for appliances” program, which will give up to $200 rebates for the purchase of more energy-efficient household appliances.
– Guest blogger Taylor Barnes is a Monitor contributor. Don’t forget to Twitter us.

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