JD Powers Predicts Minimal Impact From Cash for Clunkers Program

JD Powers feels the 'Cash for Clunkers' Program will not have a considerable impact on 2009 car sales. Although the program could 'theoretically' increase sales by as much as 500,000, they are predicting actual sales will be 'considerably lower.'

The press release cites limitations to the funding and duration of the program will keep the program from having a significant impact. They also feel the stipulations will be confusing to consumers.

In other words, they feel consumers won't know or won't understand which cars qualify and which won't. Add that to the short term duration and you have little time to educate the consumers.

"It remains to be seen if the passage of Cash for Clunkers program will be enough to draw consumers to showrooms and spark sales, but we remain skeptical," said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates.

While I agree with their sentiments, I would add in the lack of impact on fuel economy increases even if the program was taken full advantage of (500,000 new cars sold).  Given the severe restrictions on fuel economy upgrades, there will be little impact on the US fuel economy. 

In fact, it's more likely to lead to longer term fuel efficiency issues.  The vehicles most likely to be traded in under the program will be trucks and SUVs that are under the mpg limit and are worth less than the $4,500 voucher.  Since a truck owner is most likely to buy a new truck (there's a reason they owned one, after all), and they only need to improve the fuel economy by 2 mpg, the long term impact is minimal.  Add in the new rules setting up fuel economy increases over the next few years, and the trucks that are being sold today will fall way behind the trucks that have to be sold in the next few years.