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Wow...who could have ever imagined all of the buzz, national and local advertising, dealer showroom traffic, new car sales and "trickle down" business the tremendously successfully "Cash for Clunkers" (or CARS Car Allowance Rebate System) would create? Just one week after officially starting on July 24th, the program is already "out of gas," having spent all of the $1Billon of incentive money behind it. Last week, the House of Representatives quickly passed a bill providing an additional $2 billion in funding to the popular, but already cash-strapped program, but the additional funding faces a tough battle for approval in the Senate this week.

But who could have known just how popular Cash for Clunkers would be??? Early indicators included:

• Consumer polling conducted by Polk before the program began was an early indication of its likely success, with almost two-thirds (64%) of respondents expressing interest in the program. In addition to the savings, improved fuel economy and a desire to help the environment were reasons consumers gave for interest in the program.
• The huge success of similar "scrappage" programs in Europe that the U.S. Cash for Clunkers was modeled after was another early indication this program was going to be big.
• There was so much interest in the program that the government’s CARS website for dealers to register for certification in the program crashed due to the overwhelming volume when automobile dealers across the country began enrolling on June 24th.
• High levels of local, regional and national automotive advertising signaled the industry was ramping up and getting ready for the program well in advance.

Chrysler’s Cash for Clunkers marketing program may have been most successful of all the OEM programs since it addressed the main factor limiting participation identified in our research – people not having a clunker to trade. Three days before the program started, Chrysler used an extensive national advertising campaign to announce that it would match the government's incentive, or give zero percent financing, to those with a qualifying clunker. People with no clunker to turn in were guaranteed $4,500 - $3,500 off a new vehicle. Overwhelming demand quickly depleted dealer inventories and filled their parking lots with "clunkers," leading to an early cancellation of the program. 

While official industry sales figures are not in yet, early indications are that the Cash for Clunkers program, which ran for just one week in July, will result in some of the largest monthly sales totals over the past few years for many manufacturers, and slowed declines for others who did not have aggressive programs augmenting the government program.

While the bill's fate is in the hands of the Senate and remains uncertain, many in the auto industry are anxiously awaiting its extension so they can continue to enjoy sales levels unlike they’ve seen in years.

Posted by Bruce Giffin, Market Research Manager, Polk (08.04.2009)