Cash for Clunkers in 2020?
The Covid-19 pandemic has hit the world economy hard including the automotive industry, causing car sales to plummet. With job cuts, lay offs, and salary and benefit reductions, people have begun to spend only for necessities.
Luxuries have been abandoned and shoppers seek the familiar and ways to save or just get by month to month.
The simple reality is many consumers won’t or can’t buy cars now! Several experts are speculating the United States could plunge into a financial crisis similar to the Great Recession in 2008. To give a new lease to economy and boost car sales of new cars, the Cash for Clunkers program might make a comeback.
Cash for Clunkers: How did the the original program work?
It was a federal program back in 2009, designed to stimulate auto sales in the US and help the environment by providing an economic incentive for consumers to trade in old, low-mileage vehicles with new, fuel-efficient models that are safer and emit less pollution.
For owners with vehicles in drivable condition up to 25 years old and fuel efficiency rating of less than 18 mpg, it seemed like a lucrative financial incentive to trade their old vehicle in for a new one. But the incentive only applied if consumers bought a qualified vehicle with an EPA-rated fuel economy rating of 22 mpg and assume debt that, in some cases, could not afford. Additionally, consumers had to adhere to few conditions:
- For light- and standard-duty vehicles (including trucks, SUVs, and vans), new models needed to have a fuel economy rating of at least 18 mpg. So those who traded in a clunker for a new vehicle under this classification that got at least 2 mpg better were eligible for a $3500 coupon.
- New vehicles that received a minimum of 5 mpg higher than the old vehicle, qualified for a $4500 credit.
- Heavy-duty vehicles (new ones) needed to have a fuel economy rating of at least 15 mpg. Compared to the vehicle that was being turned in, a heavy-duty truck with 1 mpg better would get a $3500 coupon. Automobiles with at least 2 mpg higher would receive a $4500 coupon.
The old car had to be registered and in use for at least year – this condition was included so people wouldn’t buy an old vehicle from a junkyard and trade it in. The new car also had to be priced at $45,000 or less.
Was it successful?
It was a $3 billion program that lasted for only a few months. The overall goals of launching this program were to bring new buyers into the marketplace and help the environment by getting old, high-polluting, low gas mileage cars off the road. Unfortunately, there is lots of evidence that failed to make much of an impact. A 2009 analysis by U.S. News & World Report stated the effects on both fuel consumption and air quality were minuscule compared to the country’s total numbers.
Cash for Clunkers wasn’t a total failure, as it supported the ailing auto industry for a while, by significantly boosting sales during July and August 2009. The program increased interest in new and used vehicles and reportedly resulted in roughly $14 billion in new car sales. Unfortunately, the decline in demand during the following months offset most of the gains.
Is Cash for Clunkers coming back in 2020?
An auto analyst for Morgan Stanley, Adam Jonas, has stated this program might be introduced in the last quarter of 2020, in order to ensure automakers don’t file for bankruptcy, and helping those with needing multi-billion-dollar bailouts. Even though the program had a short-lived span when launched in 2009, the one in 2020 would be larger in scope and run for longer.
Jonas believes the 2020 version might come in the form of a $10 billion package and result in sales of approximately $50 billion. The new program is bound to add around 4 million of SAAR (seasonally adjusted annualized rate) – it is a measure for car purchase, calculated over a period of 6 months, from when the program begins. So the SAAR would increase in the coming year 2021.
Cash for Clunkers 2.0 on papers sounds well positioned to keep the automobile industry afloat in such difficult times by encouraging new car sales and bringing jobs at the same time. However, not all are fans of the program and believe it would hurt those in the most need and actual impact will fail to stimulate the economy much like the original Cash for Clunkers in 2009.
In the meantime, for sellers looking for options to sell a junk car and get cash quickly there are private options to get Cash for Clunkers. Cash car buyer programs provide instant quotes, quick payment and Free Tow and Junk car Removal in as little as 24-72 hours.