Subsidy for purchase of new car induces substitution at the margin away from a used car. And cars are durable, postponable goods.
“It was a joke,” said Jose Teddy, owner of DeKalb Auto Sales, 730 E. Lincoln Highway. “It hurt smaller dealerships that didn’t take part in it, and it took away the opportunity to purchase a car from a small dealer.”
Teddy said he believes he would feel the effects of Cash for Clunkers for the next two years.
The national government is almost as illiquid as Illinois?
“There are good and bad arguments with it,” said Ben Manning of Brad Manning Ford, 402 Manning Drive. “A good aspect would be that it did generate some business and got the gas guzzlers off the road.”
Manning also said there were certain aspects of the program that yielded negative outcomes.
“There was a bunch of business put into one month,” Manning said.
All that business in one month meant that cash flow wouldn’t stay at a steady pace over the following months, Manning said. “The government was holding off paying back the money, and dealers had to float the $3,500 and $4,500 trade-in credits which messed up our money,” Manning said.