Cash for Clunkers will likely help prop up exotic market?

You may be wondering why I think the government’s Cash for Clunkers program (CARS) has an impact on exotic car shopping, purchase or ownership. After all, you’re probably not going to accept a meager four grand for your 8-MPG Ferrari F50 or 11-MPG Lamborghini Murcielago that is worth six figures even in this economy, so where is the upside when the closest thing you have to a clunker is a two-year-old Escalade.

Here’s the logic. Of all the stimulus measures, few put money directly into the economy. With the billions spent on road-building, the same contractors who already had business will likely get the business, not the ‘little guy’. The same few materiel suppliers benefitted from it, but the general main street population doesn’t see anything different than a few months of construction inconvenience and then a smoother road. With save our homes, a few individuals will keep their home and the BANKS will avoid more home ownership issues.

Not only is the CARS program is the only one that put ‘today’ cash into the local economy, but it is the only one with a leveraged return: for every few grand Uncle Sam donated for a down payment, $20,000 to $30,000 was transacted. Regional truckers moved the cars, local detailers cleaned the cars, local gas stations fueled the cars, many local banks provided loans, local and state tax coffers got a shot, and dealer personnel earned a few bucks in commissions and support salaries. Even at face value, the (likely) $3 billion pumped $15 billion to $205billion into real circulation, and buyers spent 75% of that. That translates to as much as half a billion of revenue changing hands in each state – not shabby, since Florida was battling a $2 billion shortfall.

More than that, the waters have been chummed for more buyers who didn’t qualify but got an itch to put something new in their driveway or saw their neighbors with new cars, so there is plenty of collateral business transacting in dealer showrooms. That results in a lot of trickle-UP economics. All of this cash flow is headed directly for local businesses—electronics retailers, home stores, pizza parlors, and even grocery stores. All those local and national proprietors will get closer to black ink for the quarter.

The people who profit from that black ink are the ones who typically spend their money on luxury items. Agree or disagree with the long-term impact of the stimulus, but the CARS program is making a difference today for a LOT of people. Hopefully more than a few of those who profit from the trickle-UP will be able to find their way into exotic car stores AND take home a new toy.