Auto Industry Sales Spike is Good for Auto Insurance

Cash for Clunkers seemed to many like a program aimed at stimulating only one industry in our nation’s financial world.  Auto makers would get to sell more cars because people were getting rid of their old “clunkers”.  However, the recent spike in sales due to this program is also having a great effect on the auto insurance industry.

Think about the basics of it all.  These clunkers are all over ten years old and had very little worth.  In turn none of them likely had any more than the basic “liability” coverage on the vehicle.  Now, with more value to the vehicle and the new loan from the bank, collision coverage is required and then the consumer might add rental and medical, etc.

Also, consider that many people that had these vehicles that were turned in for the cash for clunkers program may not have used the vehicles at all.  They had determined they couldn’t get the right value and they just sat in the driveway, waiting for someone who wanted a deal.  Now, the trade in goes from no auto insurance at all, to a new full coverage policy for the insurance company.

In the end cash for clunkers is definitely having a greater effect on the actual auto makers, but the auto insurance industry could come out smelling like a rose as well!