[jyl]

The average car in the US is appx 9.5 years old. The average age has moved up with the collapse in new car sales. New car sales fell appx -36% YOY in the Oct 08-Feb 09 period.

"Scrappage" programs (also called "cash for clunkers") have been used in Europe occasionally. Currently they are in effect in Germany, France, and Italy.

The usual effect is a substantial increase in new car sales, primarily in smaller/less expensive cars, during the life of the program. After the program ends, new car sales fall off significantly, because demand was pulled forward.

The current European program has lifted the European SAAR (seasonally adjusted annualized rate of new light vehicle sales) from 10.8MM in Jan to est 13.3MM in March.

The main purpose of the programs is to help the auto industry get through a severe downturn. Side benefits can include better safety and higher MPG, since the average car becomes newer and more fuel-efficient.

Competing proposals in Congress right now. The House is looking at a scrappage program that is written to benefit the Detroit Big Three. That protectionist language will be a problem for the bill the OP linked to. The $35K minimum price is also going to be a problem for the bill. (EDIT: sorry, i read it wrong - $35K is cap not floor.) The Senate is looking at a scrappage program that would apply to all automakers, but is designed to encourage buying higher-MPG cars. My guess is that, if a scrappage program passes, it will be something closer to the Senate proposal.

Note we're seeing car sales starting to recover off the bottom anyway - Feb SAAR was 9.1MM, Mar SAAR was 9.8MM.

So, combining that recovery with a scrappage program, 2H09 could see a substantial improvement for the auto industry. We may see the US SAAR climb to 12-14MM, from the low of 9.1MM in Feb.

Import car brands would see most of the benefit from a scrappage program, Detroit would see limited benefit (I suspect F would see the most, as it has the best small car lineup), and luxury brands would see little to no benefit.

The SAAR recovery won't be great for everyone. Chrysler may not make it, and GM is likely to spend some time in BK and emerge at half the size. But I think F could do pretty well. When the Dodge RAM is gone, and Chevy/GMC are in bankruptcy court, wouldn't some of those buyers move over to F-series trucks?