Will Government Bring back Cash for Clunkers in 2020 to Spur Economy?


Officially called the Car Allowance Rebate System (CARS), the previous program that ran in 2009 gave new vehicle buyers vouchers of $3,500 to $4,500.

The payments were in exchange for scrapping vehicles up to 25 years old that were still licensed and in operation.

The idea was to scrap older, less fuel-efficient vehicles for new models with better fuel economy.

The program, which debuted on July 1, 2009, ran till November 1 of that year.

Its initial fund of $1 billion was soon exhausted and an additional $2 billion was added.

When the program was first introduced, it succeeded at removing some 700,000 clunker vehicles from the road.
Critics of the program argue that it unnecessarily scrapped cars that could have been used by low-income individuals.
Furthermore, data shows that the clunker program reduced vehicles on the road and increased the price of used cars because of the increased demand.

The program ended in November 2009 after the $3 billion allocated for it had been depleted.

Fast forward a decade later, there is talk about the possibility of introducing another Cash for Clunkers program but it would be addressing a totally different scenario.

Morgan Stanley auto analyst Adam Jonas believes that a Cash for Clunkers program may be warranted to jump-start sales.

He told Barron’s that “We don’t think the [car makers] are going to fail the way some did back in 2008 and 2009. But the industry is going to need support.”

He expects a larger program than the $3 billion the last time around.

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“We’re expecting about $10 billion of stimulus that drives $50 billion of purchases and adds about four million of SAAR [seasonally adjusted annualized rate, a measure of car purchases] over a six-month period beginning in the fall and then into early 2021.“

Car buying in the US is down because of shelter-in-place rules which are hindering auto sales.

If a new cash for clunkers program were approved, proposals include a $5,000 coupon to scrap vehicles.

Conditions may apply such as requiring as much as 60 percent U.S. content in the vehicle, household income limitations as well as guidelines on the types of vehicles you can purchase with this money.

The MSRP may also be limited to vehicles costing less than $60,000.

Even if there isn’t an official “government funded” cash for clunkers program, there are companies that have continued the concept and are still looking to purchase clunker cars.

One Cash for Clunkers site will even pickup your clunker for free and pay cash upon pickup of the vehicle.

So even if the official government funded cash for clunkers program doesn’t come back, there are still options through private organizations for those looking to get rid of their old clunker and make a few extra thousand bucks.

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