Cash for clunkers has been over for a while now, and the MSM (main stream media) probably thinks the story is over. But I went out to dinner with some friends last night. One of the gentlemen is in the car sales industry and the impact from the program is still carving a giant ditch through his life.
“Tony, if I wanted to purchase a car, how much buying power would I have right now?” I asked
“Dude, it is dead Jared. For a while there, it was amazing, but now, there are no f*cking sales what-so-ever.” hands waving, pointing to me with his thumb while he spoke.
Now, it is already my opinion that Cash for Clunkers is a Titanic of a failure. That it will eventually to be seen for doing more bad than good. But I wanted to see what Tony’s opinion is so I asked. ”The government has been touting the Cash for Clunkers program as a massive success.”
“Maybe for a month or two” he reasoned. “But now, it is even worse than before” stated with a matter-o-fact sincerity. “Despite the mess, I would have to say that I am the lucky one.”
Curious to see how he could possibly consider himself lucky, I asked “How do you figure that?”
“Well, at least I have the opportunity to sell new cars. Its worse for these mom and pop used car places, they have been going under like crazy.” He could tell by my face that I was still not following his logic.
“Jared, we scrapped all their potential inventory with Cash for Clunkers” he reached for his beer, pulled it to his mouth and swallowed the last of the liquid that the glass contained. Then looking at me, he continued. “I have a buddy who is telling me they can’t find any used cars in their price range that have even the smallest margin to make a profit. The only ones they can find are pieces of garbage. And without inventory, they are folding.” slamming his empty pint glass on the table.
Finally connecting the dots and letting his point sink in for a moment, I revealed my beliefs.
“Well Tony, I can honestly say I am not surprised.”
It was his turn to be curious. “And why is that?”
“Lets use an example.” I begin. “Say you take five months, August, September, October, November, December, and January” Interested, Tony leaned forward and so I continued “And say that every month, on average, you sell 10,000 vehicles. How many vehicles total are we talking about?”
“Ok” he said thinking. “Well 5 months x 10,000 vehicles a month is 50,000 vehicles”
“Right!” I say in a congratulatory inflection. “The market is dictating the need for new vehicles, and it is saying that in those 5 months, it only needs 50,000 vehicles sold”
“Now, lets pretend that all of the sudden, cars for the months of August and September are HALF OFF! The market still only needs to sell 50,000 vehicles, so how many cars do you think would sell in those two months?” I questioned.
“Well, I wouldn’t be surprised if you sold all 50,000 in those two months alone” he surmised.
“Then how many would you sell for the months of October, November, December, and January?”
Raising his eyebrow, he spoke with some disdain “Not that many”
“Yeah” I said with a sour face and staunch agreement. “Not that many. And the danger is that we don’t know how many cars the Government pulled from future sales to sell during the Cash for Clunkers program. Was it 5 months? Was it 10 months? We just don’t know.”
“Then it makes sense why all these car places are going under” Tony’s voice was growing pretty hollow at this point. He looked down into his empty glass for what seemed like a long while. Then, Tony turned to look up at me and said
“I just am trying to make it through winter”
And I could see that underneath the warmth of the intoxicating Stout he had just drank, there was real fear. Real pressure. So looking him directly in the eyes, I smiled encouragingly and said
“Aren’t we all man, aren’t we all” and ordered another round.