Car buyers, dealers, and auto executives responded happily to cash-for-clunkers, but used-car prices have risen and charities have seen a big drop off in donations because of it.
The enthusiastic response to the government’s cash-for-clunkers program may have put smiles on the faces of car buyers, car dealers, and auto executives, but as the buzz wears off, it’s clear that there are some losers as well as winners. Even though the program helped to sell almost 700,000 cars and trucks, Chrysler and General Motors still reported lower year-over-year sales in the month of August, largely because they both had inventory problems. The big winners—Ford, Honda, and Toyota—all chalked up hefty gains.
Also on the debit side of the ledger is the impact on charities that rely on car donations for a large part of their funding. Many car owners opted for a $4,500 rebate for their clunker instead of taking the far lower tax write-off they would have gotten if they had given it to a charity. Some charities have already seen a steep drop in car donations and some estimates peg overall revenue shortfall at about 25%. Charities were already feeling the impact of a change in the car-donation write-off that limited the tax deduction to the amount that the charity actually got for the car when it was sold, rather than the market value. Tip: If your clunker wasn’t eligible for a rebate or you missed out on a deal, you can find out where to donate it at DonateaCar.com.
Many consumer advocates are also worried about the effect the cash-for-clunkers program will have on used car prices. The program has taken hundreds of thousands of relatively cheap vehicles off the market, they say, at the same time it has upped the prices on what’s left, leaving lower-income families looking for inexpensive transportation in a bind.