Wednesday, August 12, 2009

Interest in the Cash for Clunkers Program Diminishing Already?

Just barely a week after launching, it looks like the public’s interest in the new Cash for Clunkers program is already fading. Although car dealerships and showrooms were overwhelmed with traffic earlier last week, when sales reportedly topped 250,000.

"We see that interest dying down," Senior Analyst Michelle Krebs said in an interview on the consumer auto industry resource group's analysis of buyer intentions. "It's still high. It's better than pre-clunker levels, but it's off its peak."

Krebs said the original $1 billion funding for the program was "very low in relation to the size of the auto market." This, she said, created a "Gold Rush" mentality where consumers stormed dealers at the end of July and in the first days of August to cement discounts with rebate funding running low.

The "clunker" initiative offers rebates of up to $4,500 when consumers trade in older cars for more fuel efficient new ones. Dealers say buyers are trading in mainly sport utilities, pickups and other U.S.-made vehicles for fuel stingy foreign-made passenger cars.

Automakers credited "clunker" trade-ins for boosting July sales to the best annualized rate for 2009, a year in which carmakers have contended with a devastating decline in business. The horrid, recession-driven sales environment contributed to bankruptcies at General Motors Co and Chrysler this spring.

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