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August 12th, 2009

Lawmakers Say Clunker ‘Out of Stock’ Vouchers Needed

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The White House is reviewing a request made by two Michigan lawmakers who want to make Cash for Clunker vouchers available for out-of-stock vehicles. The proposal would allow consumers to utilize C4C vouchers for out-of-stock models of a particular color (or other desired specs).

Republican Representatives Candice Miller and Fred Upton of Michigan say the vouchers would help spur sales among dealers who have experienced a depleted inventory due to the program’s immediate response. The Wall Street Journal reports that the Department of Transportation will review the proposal:

“The inventories of some auto makers and dealers have been so depleted that the program’s extension may be limited in its effectiveness,” the lawmakers said in a letter to Transportation Secretary Ray LaHood.

So far, most major U.S. auto makers have proposed relatively modest production increases following the jump in demand.

However, the auto industry seems skeptical about whether or not to increase production demands, since, as we noted last week, fears remain that once C4C is finished, sales will drop off to the levels they were at before the program began.

Under the lawmakers’ proposal, the trade-in transaction would not be completed until the ordered vehicle arrives on the lot. The Journal reports that to date, “dealers had requested reimbursement for 292,447 vouchers issued under the clunkers program totaling about $1.23 billion.”

Since original estimates on the program’s success varied so greatly, giving C4C a grade at this point seems difficult. In April we wrote that “A outside consulting firm estimated that the program… could generate up to $25 billion in economic activity.” Whether that estimate was lofty or the program has come up short has yet to be seen. However, in June the Congressional Budget Office estimated that C4C would generate 150,000 auto sales, a number that has already been surpassed.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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