Clunker Hangover May Drive Auto Sales From First to Worst

Last Updated Sep 22, 2009 1:43 PM EDT

U.S. auto sales could fall from first to worst this month, due to the hangover effect from Cash for Clunkers.

"The best month of the year for car sales is being quickly followed by what could be the worst month of the year," said Jeremy Anwyl, Edmunds.com CEO.

Edmunds.com predicts U.S. auto sales will fall to a seasonally adjusted annual rate of only 8.8 million units, the worst so far this year and in fact the worst since Edmunds started keeping track, almost 28 years.

Cash for Clunkers, formally called the Car Allowance Rebate System, was a government subsidy of up to $4,500 for trading in an older gas-guzzler for a new, more fuel efficient vehicle.

The program boosted the August SAAR to 14.1 million, the highest month in 2009 by far, according to AutoData Corp. The year-ago SAAR was 13.6 million, in August 2007, before the worst of the automotive recession hit.

In addition, early "clunker" trade-ins helped boost the SAAR to 11.2 million in July 2009. Before that, the monthly SAAR never topped 10 million this year.

I said earlier that since it worked so well, maybe the automakers themselves would continue the Cash for Clunkers concept after the U.S. Treasury Department dropped it, effective Aug. 24.

So far that doesn't seem to be the case. General Motors, for instance, recently unveiled a money-back guarantee for GM products.

Not everyone has such a dark sales forecast for September. Earlier this month, Barclays Capital predicted a September SAAR around 10 million. That would be a comedown from August, but still an improvement over the first half of 2009.

Photo: Edmunds.com