Maybe they didn't need that extra $2 billion from Congress after all. Edmunds. com, which has been tracking car sales during the cash for clunkers program, says that consumer interest is slowing. If current trends continue, Edmunds says, vehicle sales could be back to pre-Cash for Clunkers levels by Aug. 20. Activity appears to have peaked on July 29. This isn't especially good news because it suggests that cash for clunkers was a spending aberration and not the beginnings of stepped up buying activity - what the economy really needs.
The funding for the original program was low relative to the size of the auto market, creating a Gold Rush mentality where consumers hurried to take advantage before funding ran out. In fact, it largely sopped up the pool of buyers who owned clunkers and had the ability to buy or finance a new vehicle. In addition, automakers are running extremely low on inventories of vehicles eligible and popular for clunker trades. With additional funding now approved, the sense of urgency to participate in the program is gone and the pool of eligible clunker owners who can buy a new vehicle has shrunk. Interest in the program is fading as fast as the first billion was used up. Quite possibly, some of the extra $2 billion will go untapped.