Comments on: Do Consumers Get Excited About Sales They Don’t Qualify For?

By: TomB

TomB — Tue, 03 Nov 2009 03:01:32 +0000

I suspect that C4C generated paper growth by shifting timing rather any organic growth. But a more recent post of your’s suggests a mechanism that would encourage people to trade in their cars now.

http://www.coyoteblog.com/coyote_blog/2009/11/the-unintended-consequence-they-pretended-not-to-expect-but-everyone-predicted.html

The price of cars in the $3000 to $8000 range was pushed up because all the “clunkers” were destroyed. So your 10 year old, 100,000+ mile Honda, normally worth $7000, is now worth $8500. Time to buy…another Honda.

By: John David Galt

John David Galt — Mon, 02 Nov 2009 00:02:02 +0000

The funny part — and what most of the people affected don’t know yet — is that everyone who got the subsidy is going to have to pay it back on their 2009 tax return. The joke’s on them!

By: Michael

Michael — Sat, 31 Oct 2009 03:56:57 +0000

morganovich,

You are quite right. I have a 94 Explorer that I keep to let the family haul plants and other dirty home improvement goods around in. So it’s not in the best of shape. KBB put it’s value at $400 this past spring. KBB now values the car at $1,500. The lower middle class had it’s tax money used to provide perks for the upper middle class. Now when the lower middle class needs a car in the future, they will get hit with higher prices.

We will continue to see this administration to play this same financial game with health care. Younger, lower wage employees will have much higher taxes to cover the health care perks promised to seniors.

By: agesilaus

agesilaus — Fri, 30 Oct 2009 22:14:17 +0000

Well we were in the market when this boondoogle went into effect, we needed a low priced second car to get the wife back and forth to work. But figuring that the dealers would be less inclined to deal since the lots were depleted we just put it off, haven’t done anything yeat as a matter of fact.

By: richard

richard — Fri, 30 Oct 2009 18:52:27 +0000

Warren,

The idea that a manufacturer would increase production base on a single month sales blip looks a lot like the ‘permanent income hypothesis’, but then not for individual consumers, but for corporations.

http://en.wikipedia.org/wiki/Permanent_income_hypothesis

By: morganovich

morganovich — Fri, 30 Oct 2009 17:59:36 +0000

this analysis also leaves out the dead weight loss of destroying existing cars. not only is that environmentally ludicrous (can you really claim that a few extra MPG over a car’s lifetime will make up for the environmental cost of building a whole new car and disposing of an old one?), but it’s fiscally stupid both in it’s overpayment and in the requirement to actually destroy the engine, yet another cost added to the equation.

this was a naked, disgusting subsidy to car manufacturers both from a cash grant and a supply of competitive product standpoint.

it’s green credentials are farcical.

alas, i fear that makes it par for the course among “green jobs” creation initiatives.

By: Another guy named Dan

Another guy named Dan — Fri, 30 Oct 2009 17:56:13 +0000

I think that the main result of both the Cash-for-Clunkers and first house tax credits was to move sales that would have likely happened anyway forward by about three months. The January numbers for both markets will be telling as to whether these programs actually increased any, rather than dislocating, demand in the housing and auto sectors.

Yes, the incentives did likely increase traffic at dealerships and open houses, but I think that these people would have been in the market in the next few months anyway.

I think the administration is trying to argue that these programs were the equivalent of the $29 VCR sales we ran back when I sold electronics. People would get to the store to discover that the $29 machine was a two head, had a 10 channel tuner, and looked like it was assembled by monkeys using Elmer’s glue and paperclips. Our goal as salespeople was to upsell them to the $100 and more models that had the features that people actually wanted. These programs seem to have been structured specifically to prevent this from happening.

By: perlhaqr

perlhaqr — Fri, 30 Oct 2009 17:52:09 +0000

The only thing I could see affecting the rates of sales to people who didn’t qualify for a “clunker” subsidy was that I saw a lot of dealerships running other, simultaneous sales, during the clunker event.

But I don’t think that’s very analogous either, because those people weren’t excited by the discount others were getting, they were excited by the discount they were getting, even if it wasn’t as large as those who were the recipient of tax dollars.

By: James H

James H — Fri, 30 Oct 2009 17:34:27 +0000

I did not qualify, and don’t know what “all the excitement” is about the program. I haven’t talked to anyone that I found to be excited about this unless they had a “clunker” to trade. I’m less than excited about paying for this for the rest of my life plus interest along with the rest of the stimulus waste programs.

The other effect was removing affordable vehicles from the market, or raising the price of them, which hurts lower-income families or individuals needing a vehicle.

By: david stevens

david stevens — Fri, 30 Oct 2009 17:33:23 +0000

I don’t think your example #2 applies. The kids aren’t buying their meal anyway – this is a straight up discount to mom and dad. If a kids eat free offer were to bring in more people to eat who don’t have kids (you know how people who don’t have kids love to be in a restaurant with them running around) then this would be analogous.