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The sucess of the "cash for clunkers" program has caught the car manufacturers off guard.
Some of the most popular models purchased under the program have been small sedans from Chevrolet, Ford, and Honda. These are the same cars that had a big drop-off in sales in the first half of the year.
GM has stated they will increase production by about 60,000 units later this year. The production increase will heavily target the Chevrolet Cobalt.
Meanwhile, Ford said they will ramp up production on the Focus and Escape models, while Honda will increase production on the Civic, CR-V, and Odyssey.
This is a tough decision for the manufacturers since sales of these vehicles were generally poor before the "cash for clunkers" program. Although sales weren't strong, they had managed to lower production to levels where dealers could price the cars higher and offer less incentives.
Now the manufacturers are faced with a dilema. Inventory has gotten too low and the "cash for clunkers" program was extended. However, the program is starting to run out of steam. The first week of August saw a big drop in sales compared to the last week in July.
If GM, Ford and Honda overshoot production and the "cash for clunkers" program fizzles out soon, these car makers will once again have too much inventory. This means prices will likely head back down.
If you're thinking of purchasing one of these vehicles and you don't have a "cash for clunkers" trade-in, your best bet may be to wait at least a couple of months. Inventory levels should go up as demand goes down. Furthermore, the 2010 models are starting to hit the showrooms. Dealers will be pressured to sell any 2009 models left over as they try to make room for the 2010s.
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