Cash for Clunkers

“Cash for Clunkers” shows impressive results – in Germany

An idea that was rejected in the U.S. is working in Europe
DealersEdge Daily Headlines
In the U.S., some economists and politicians have their doubts about whether a so-called “cash for clunkers” program will work. But in Germany, the idea is a roaring success, reports the Wall Street Journal.

Germany’s $3,200 subsidy for people who scrap an old car and buy a new one has triggered a stampede to dealerships and a run on small cars. It’s also inspiring retailers of other products, from electronics to false teeth, to copy the idea.

The auto industry’s importance to Germany — where the government estimates that around one in seven jobs depends directly or indirectly on autos — led the government to introduce the old-for-new car subsidy. It took effect Jan. 27.

Since then, the program has sparked a car-buying craze in a nation notoriously reluctant to consume. Sabine Mumm, a librarian, decided last month to buy her first new car in more than a decade. It took several weeks before she found a dealer with any in stock.

“All the available cars were gone, especially the small cars,” she says. Dealerships were so full of customers, she says, “it was really hard even to get a dealer’s attention.”

To get the government check, people must scrap an existing car that’s at least nine years old and buy a new car that meets the latest emissions standards. So far, 134,000 people have applied the so-called scrap bonus, a number rising by 7,000 a day.

Other European countries, including France, Italy and Spain, have introduced “scrap bonuses” and in some cases, subsidized loans for buying cars. The trend is spreading to Eastern Europe.

“It’s a real sales boom,” says Ceyhun Tan, a Volkswagen dealer in Berlin. He says his February sales are two to three times as high as a year ago, thanks to the scrap bonus. Most of his new wave of customers, says Mr. Tan, are elderly people whose ancient autos are worth less on the used-car market than the scrap bonus.

Originally posted at 3/2/09

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