Cash for clunkers consequences

By Morgan Chesky - bio | email
Posted by Ellen Krafve - bio | email

TYLER, TX (KLTV) - Out with the old and in with the new. But, what happens when you run out of both? In four weeks, cash for clunkers put 700,000 new cars on the road, putting just as many old ones in the junkyard. A month later, the clunker craze is gone, but its consequences have just begun.

August 29, 2009, Cash for Clunkers was over. Today, final dealer payments are being processed, and manager John Ray at Lively Cadillac and GMC says the government promises came through.

"We got paid on all of them is the great news," said Ray.

But, his opinions haven't changed.

"I don't think clunkers was good," said Ray. "I really don't."

Texas vouched for $183,000,000 of the nearly $3,000,000,000 clunker rebate total. It's money taking cars off the lot where they couldn't be replaced.

"It was because of the fact we didn't have any inventory, or inventory was way down GM shut down for several weeks," said Ray.

And, clunker consequences continue.

"I think what the future is that the used car market is completely messed up," said Brown. "Everybody's a little scared."

The cars used car salesman Lance Brown once easily bought at auction have become commodities.

"They've taken a lot of the used cars for Cash for Clunkers out of our inventory," said Brown.

Business is down for Brown, but he says he won't be surprised if many clunker trade-ins end up on his lot.

"You've got a lot of people who bought through Cash for Clunkers that, really, I'm not sure could afford to go into a new car," he said.

A survey of 1,000 Cash for Clunkers participants, done by CNW Research, an automotive research firm, found 17 percent had doubts about their vehicle purchase after taking on monthly car payments of $275 to $350 per month. In a waiting game for inventory, Brown says he's lucky for the stability of used car sales.

"It's kinda hurtin' all of us, but we kinda got to hang in there and make it work," he said.

Dealers say the true test of Cash for Clunker success will show itself in coming months. The number of repossessed clunker deals won't show up for another month or two as buyers begin the realize the $3,500 cash rebate, doesn't cover years worth of monthly car payments.

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