Cash For Clunkers Delivers On Predicted Unintended Consequences

Although it increased temporary demand in the short term, concerns for the C4C plan arose as early or even before the program was ended.
But, the government offered free money to entice people to buy a new car. What could go wrong?

A lot actually.

By artificially increasing the demand now, this dramatically decreased future demand. Another unfortunate consequence is based on government inefficiencies. There was such a large influx of requests for the government money, that they could not keep up. This forced dealers to sell cars at a loss, but promised them money after. This would not be a problem if the demand was sustained. Because the demand has dropped off, the dealers still have that loss, but now are not selling enough cars at full price to stay afloat.

On top of that the timing for C4C was picked poorly. Legislators were so concerned with getting a higher approval rating that they did not take the timing of the plan into account either. The program was implemented in July, and was stopped in late August. The new model year begins typically in September. Unfortunately the increase in demand was right before the new model year began when prices and profits would be higher.

Cash for Clunkers turned out to be a short term popularity boost for politicians, but it came with a long term cost for Auto manufactures and dealers.