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Car-buying Web site faults White House economic claims for Cash for Clunkers program

KANSAS CITY, Mo. — A feud has broken out between the Obama administration and car-buying Web site Edmunds.com about the effect of the Cash for Clunkers program on overall car sales.

It began Wednesday when Edmunds put out an analysis of the popular summer stimulus program that provided $3,500 or $4,500 in rebates to consumers trading in old gas-guzzlers for new fuel-efficient vehicles.

Nearly 690,000 vehicles were sold in the program, but Edmunds calculated that only 125,000 cars were incremental sales — sales spurred directly by the program. The rest, it said, would have been sold anyway.

According to Edmunds, that put the average taxpayer cost for each incremental vehicle sold at $24,000.

"Our research indicates that without the Cash for Clunkers program, many customers would not have traded in an old vehicle when making a new purchase," Edmunds.com senior analyst David Tompkins said to another Web site. "That may give some credence to the environmental claims, but unfortunately the economic claims have been rendered quite weak."

Hogwash, responded Mason Phillips on the White House blog. He argued that the program boosted overall auto sales, with about 2.3 million vehicles being sold in July and August, when it was in effect.

"This analysis ignores … reports from across the country that people were drawn into dealerships by the Cash for Clunkers program and ended up buying cars even though their old car was not eligible for the program," Phillips wrote. He added later: "Major automakers including GM, Ford, Honda and Chrysler all increased their production through the end of the year as a result of this program, which will help boost growth beyond the third quarter."

Edmunds contends auto sales were beginning to recover before the program started in late July.

"We've said all along that it should have been started back in February or March, when we were at the lowest part of the sales cycle," said Michelle Krebs, a senior analyst. "Our view was to do the program earlier and do it fast."

Edmunds said October would be the strongest month for auto sales this year. It projects the annualized sales rate for October to be 10.4 million and said the October sales figures would have been even stronger had the program not shifted a chunk of sales into July and August.

"The fundamentals of the auto marketplace are improving faster that the current sales numbers suggest," Edmunds said in response to the White House. "Isn't this a piece of good news we all can cheer?"

Car-buying Web site faults White House economic claims for Cash for Clunkers program 10/30/09 [Last modified: Friday, October 30, 2009 10:18pm]
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