IBJNews

Purdue prof: 'Clunkers' could stall retail sales

Back to TopCommentsE-mailPrintBookmark and Share

The federal "Cash for Clunkers" program has opened a floodgate of car sales that President Obama says is a much-needed boost for the economy. But retailers may feel the negative effects of America’s collective investment in new cars, predicts a Purdue Retail Institute researcher.

Formally called Car Allowance Rebate Systems, the clunkers program pays drivers $3,500 or $4,500 to trade in a gas-guzzling vehicle for a new fuel-efficient car. The first $1 billion allocated to the program lasted less than two weeks, and the federal government is considering a $2 billion extension of the subsidy.

Because more Americans are taking on new car payments, they’re likely to have less money to spend on other retail items, Purdue University’s Richard Feinberg said in a news release today.

“The fact is that if the Cash for Clunkers program induces people to buy a car when they weren’t expecting to buy a car, that money is not going to be available for retailers,” he said. “Retailers don’t have a fighting chance, and there is nothing to be done.”

Feinberg said with about 750,000 new cars in American garages with an average monthly payment of $400, retailers counting on back-to-school and holiday-season windfalls could be disappointed.

“Retailers are still in pain from a very poor 2008 Christmas holiday retail season,” he said. “After suffering from the worst holiday sales season since 1970, retailers will be facing an even more dismal 2009 in part because of the ‘Cash for Clunkers’ program.”

Credit Suisse economist Jonathan Basile told The Wall Street Journal yesterday that it is “very possible … there could be some kind of substitution effect,” as consumers invest their money in cars rather than clothing and other retail.

But Jim Kittle, CEO of Indianapolis-based Kittle’s Furniture, said despite the new car subsidies, he is expecting a better holiday season than 2008.

“Actually, I think it [‘Cash for Clunkers’] is getting people back in the spending market,” he said. “I think we will have a better Christmas than last year. We are coming out of the recession or whatever we are in.”

“I think the fourth quarter is going to be pretty good,” he said. “I would like cash for broken furniture too, but I don’t think we are going to get that.”

Kristin Kohn, owner of Mass Ave stores Silver in the City, At Home in the City and Nurture, said she is planning for a Christmas season equal to last year’s. Even if her stores see a decline, she wouldn’t attribute it to the CARS program.

“Even if I thought that I saw a decrease in sales, maybe we would take a little bit of a loss for a greater good. I personally think it’s a great program,” she said. “If I feel like it is going to limit people spending in our stores, then I will look for other ways to make up for it through marketing and other variables.”

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. I keep wondering why I keep hearing about this problem of corporations leaving America, and I never hear a reasonable proposal to lower corporate tax rates and raise personal rates on income from capital gains and dividends, especially for high earners. It is just too simple of a solution for Congress to embrace?

  2. Are you financially down and you need money to settle your dept,or you need money to start up a business or to invest on a huge business,we also offer Loans to individuals, Firms and cooperate bodies at low interest rate , loan terms determinant,Loan amount between the sum of $5,000.00 to $100,000,000.00. US Dollars And Euro. Loan for developing businesses a competitive edge/ business expansion. We Offer The Following Kinds Of Loans. Personal Loans (Secure and Unsecured) Business Loans (Secure and Unsecured) Consolidation Loan FIRST INFORMATIONS NEEDED ARE: BORROWER’S DATA’S INFORMATION,FILL AND RETURN FOR QUICK START UP PROCESS. Name:_________ Last Name:_________ Age:_________ Contact Address:_________ Country:_________ Amount Needed as Loan:_________ Loan Duration:_________ Phone Number__________ Monthly Income/Yearly Income:_________ Purpose for Loan:_________ Occupation:_________ How Soon is Loan Needed__________ Email via: albertbrownfirm@outlook.com

  3. is a disaster. SR37 already needs to be built to interstate standards between 465 and SR144. Southport Road is a mess each morning and evening.

  4. Bass Pro Shops would be good for the mall as well as a Giant Eagle Market District or a Jungle Jim's International Market Place grocery store like the one near Cincinnati Ohio.A Disney quest indoor theme park would be good.An Academy outdoor store would be good too.Indoor Circus shows and magic shows would be good as well. A casino with sports bar would be good.A Disney theater inside that shows movies and Broadway shows would work.Nashville Tennessee concert shops with indoor neon lights would be good.How about a theater that shows travel shows and theme parks. A train store would be good.How about a giant toy store with high tech video games.

  5. This development is in addition to Allpoints Midwest 5, Aitrtek, a recent FedEx and more in Plainfield. Greenwood and Brownsburg also have similar projects.

ADVERTISEMENT