Cash for Clunkers: Here Comes The Hangover
"Cash for clunkers" might have "juiced up" new vehicle sales and provided some initial and temporary stimulus to the economy, but there are some secondary costs now surfacing in the "hangover" period:
1. Shortage of cheap used vehicles and rising prices (see chart above).
In his 20 years in the business, salesman Mark Sauer has never had a tougher time finding inexpensive used cars. "It's never been this bad," said Sauer, buyer and sales manager of Vaccaro's Auto Buyers of Reading, PA. "Customers used to be able to find a good car for their son or daughter to take to college for $2,000 or $3,000, but now that same car may cost $5,000," said another dealer. "It's sad."
2. Some small car dealers are now going out of business.
Having the toughest time, though, are smaller dealers who focus on vehicles in the low-price to midprice range, and some have closed as a result, according to the Pennsylvania Independent Automobile Dealers Association.
3. Financing issues resulting from the rising prices.
Another problem is that used-vehicle prices have quickly risen above their book values, making it tougher for customers to secure financing.