Edmunds.com Responds to White House Criticism

By Michelle Krebs October 29, 2009

Today the Department of Transportation and White House chose to respond to an analysis Edmunds.com released Wednesday that looked at auto sales this year and what sales volumes would have been had the popular Cash for Clunkers program never existed.
 
At issue is one point of the analysis showing the taxpayer cost for every incremental vehicle sold was $24,000. To be clear, Edmunds.com is not disputing the government's statements regarding total voucher applications, vehicles sold or voucher values. The key question is how many of these sales would have occurred anyway.

Apparently, the $24,000 figure caught many by surprise. It shouldn't have. The truth is that consumer incentive programs are always hugely expensive when calculated by incremental sales - always in the tens of thousands of dollars. Cash for Clunkers was no exception.
 
The White House claims that our analysis was based on car sales on Mars and that on Earth, the marketplace is connected. We agree the marketplace is connected. In fact, that is exactly the basis of our analysis.

The White House also claimed we missed the possibility that Cash for Clunkers generated excitement and consumers bought vehicles even if they didn't qualify for the program -- a claim that has been widely supported by anecdote but by little analysis. It does, after all, seem a bit odd that masses of consumers would elect to buy a vehicle because of a program for which they don't qualify -- doubly so when you add in the fact that prices shot up during Cash for Clunkers, creating a disincentive to buy.

Finally, the White House claims that the increase in fourth-quarter production reported by the car manufacturers can be attributed to Cash for Clunkers. But here is a better reason:  the economy is recovering accompanied by improved car sales. No manufacturer increases production -- a decision with long-term consequences -- based on the 30-day sales blip triggered by an event like Cash for Clunkers.

With all respect to the White House, Edmunds.com thinks that instead of shooting the messenger, government officials should take heart from the core message of the analysis:  the fundamentals of the auto marketplace are improving faster than the current sales numbers suggest.

Isn't this a piece of good news we can all cheer? -- Jeremy Anwyl, Edmunds.com CEO

 

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hesaid says: 1:02 PM, 10.29.09

Hey Edmunds, don't rain on my parade and don't bother me with the facts!

guy1974 says: 10:43 AM, 10.30.09

At least you admit the conomy is improving, in part due to the stimulus package. Cash for Clunkers was one part of that successful package.

gracchi says: 11:42 AM, 10.30.09

Thank you for being a voice of the people and publishing the true cost of the cash for clunkers program. "We the People" support you for publishing facts - regardless of the temporal political climate.

"Perfect information" in the market place is skewed and our liberties are being tested. We the people are only able to fulfill the inherent desire to better our self interests if we are armed with perfect information.

Americans can build a quality automotive machine that sparks - pride of ownership. We have to want it, design it, build it, buy it, and sell it to the global economy. An informed individual will spark the passion of the people to do our best.

Auto industry recovery will come through hard work, not through consumer subsidy from the taxpayer.

Market corrections can adjust with access to perfect information. Thank you for your patriotic support! Keep up the good work!

panhead2 says: 12:57 PM, 10.30.09

Umm...did anyone take into account that most, if not all, of the "clunkers" purchased by the dealers then went to auction and are now being sold by used car dealers? "Gross polluters" going back on the street (I'm buying one myself, they're cheap!) plus it satisfies a good bit of what demand there would be for Detroit factories to fill. White House, as usual, is full of crap and is decidely not smarter than a fifth grader. And wasn't it a conflict of interest to both have a stake in GM and use public-dollars as an incentive and throw the labor unions a bone?

sciondm says: 1:48 PM, 10.30.09

The math and justification used in this finding is untrue and misleading. I am a car saleperson and I experienced the customer first hand. Your reasoning is that of someone unfamiliar with retail sales and customer influences. I can assure you this program was the exact thing the automotive industry needed in these hard times.
As for panhead2
[quote]Umm...did anyone take into account that most, if not all, of the "clunkers" purchased by the dealers then went to auction and are now being sold by used car dealers? "Gross polluters" going back on the street (I'm buying one myself, they're cheap!) plus it satisfies a good bit of what demand there would be for Detroit factories to fill. White House, as usual, is full of crap and is decidely not smarter than a fifth grader. And wasn't it a conflict of interest to both have a stake in GM and use public-dollars as an incentive and throw the labor unions a bone?[quote]
You must still not be in fifth grade. I say this because you do know how to read or you have no clue what the stipulations were for the program. The cars that were taken in have the engine and transmisson seized and sold to scrap yards. Your comment lends itself to the White House that not all cars taken in during this time qualified for C4C.
Also, in the world of retail, a consumer is more motivated to buy when others are buying. It's simple psychology and it works.
We sold out of our entire inventory and had the best month of business we have ever seen. It worked and I would just like to say "thank you" to the government for doing something.

whfullocrap1 says: 3:52 PM, 10.30.09

Let's see now, who am I going to trust, Edmunds, one of the leading authorities in the automotive industry for almost 50 years, or the charlatans in the White House, who have yet to say one honest thing? Hmm.

greenpony says: 4:18 PM, 10.30.09

OF COURSE, sciondm, the program was a success for you. If you as a car salesman could tolerate the tardiness of government checks, you got to clear out your older, lower-margin inventory, vehicles that may have otherwise languished on your lot for months. When I was last at my local Ford dealer for an oil change, all they had left were trucks, SUVs, a couple Mustangs, and some V6 Fusions. If the government rolled out a program to stimulate my industry as much, I'd probably be quick to judge it as a resounding triumph too. But you're missing the point completely. Step outside your car-salesman box and look at the big picture. The government just rewarded people for polluting the environment by giving them money towards a brand spankin' new car. Does the cost (even if it's only half of what Edmunds.com says) really justify the outcome? Aren't there more efficient and less costly ways to stimulate the economy and pull guzzlers off the road?

fulcrumb says: 5:31 PM, 10.30.09

panhead2,

ALL of the Cash for Clunkers trade-ins are to be scrapped. If you bought a vehicle that was traded in to a dealer under the C.A.R.S. program, that dealer is in a world of hurt, and you might be, too.
But if you're buying an eligible car from a private party or a new/used car dealer that was NOT submitted for the program, no sweat.
Not every eligible trade-in that came in during C4C was submitted. Trades that came in for rental returns, or trades that came in before the program, for instance

The truth lies in both arguments. Let Edmund's figures represent the \Initial\ cost per vehicle sold, and be willing to accept that there was/is a "sunshine effect", perhaps still going on, that maybe the guy looking at the Expedition tipped over because the dealership had a lot of traffic on that day. And the Media generally gave it a positive spin.

Personal anecdote: During the C4C campaign, our one-owner '99 Mercury Cougar broke down and was in need of some major work (cracked intake manifold). We came very close to trading it in on an '09 Focus SE 5-spd. We could've qualified for the $3500, way more than a 146,000 mi. car that won't idle is worth, plus all the money Ford was putting on the hood. In the end we fixed the Cougar and will hang on to it for a while.(it's still cute) We just had purchased a 2009 Mercury Mariner two months before and, as attractive a deal C4C made it, we decided another payment was not so good. The point being that trading in the Cougar wouldn't have been considered were it not for Cash for Clunkers.

Personal anecdote 2.0:
We are very fortunate to be able to work with a great dealership with good salespeople and a top shelf service dept. We've bought or leased six vehicles ourselves plus four more we helped our children buy or lease from this store in the last twelve years.
Folks that bad mouth Detroit 3 stores maybe ought to go back on a different day. The cliche about the plaid sportcoat, two-tone wingtip car salesman is so over.

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