One stay of execution appears to be all that the Cash for Clunkers program is destined to get. It was announced today that the federal government will be shutting down the CARS initiative effective the evening of Monday, August 24. Unlike some programs, which are shuttered due to ineffectiveness, Cash for Clunkers has been a victim of its own success. The primary reason for its early termination, prior to the Fall deadline, has been the fact that so many citizens have taken advantage of the rebates it offered that there is no more financial fuel left in its $3 billion tank.
Just how many cars have been moved thanks to the CARS incentive? According to officials figures, as many as 457,000 vehicles have been sold since July 27, with thousands upon thousands ofÂ rebate applications still awaiting processing. That figure represents $1.9 billion in government funding, with $1 billion of the total was consumed within a single week of the program's initial inception. Based on the flow of payments to dealerships that have been made so far, the Transportation Department has determined that there are most likely enough outstanding automobile sales to absorb a significant portion of the remaining funds sitting in federal coffers.
The rest of the money is earmarked to be spent during the final weekend of Cash for Clunkers opportunity, which is being projected as a seller's bonanza by automotive industry observers. The prediction is that any buyers who have been sitting on the fence in terms of taking advantage of the program's generous $4,500 maximum rebate will be pushed over the edge by the short window of time left to claim their piece of the action. Once the $100 million in administrative costs and $400 million in applications currently being processed have been taken into account, approximately $600 million in available funding remains on the table.
By and large the entire CARS program has been heralded as a success, at least from an economic perspective. While its touted environmental benefits may not have measured up to the initial hype, the impact it has had on automobile sales in the United States cannot be overstated. For the first time in almost a year, several large automakers saw their lagging sales figures transformed into healthy increases when compared to the previous year. Inventories were scaled down, production across the country was jumpstarted and dealerships were able to avoid a sales meltdown in what has traditionally been their strongest season.
Of course, there have also been a few clouds appearing on the Cash for Clunkers horizon. Some dealers have complained that they have had difficulty receiving timely payments from the federal government after filing their rebate paperwork, while others have expressed puzzlement over the rejection rate they had to deal with towards the beginning of the program's inception. However, when taking into account its overall impact, it is difficult for the industry to be anything other than optimistic when faced with the surge of consumer interest in purchasing large ticket cars and trucks while the economy recovers from a deep recession.