Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The Stimulus That Drove You Crazy

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Following the immense popularity of the Cash for Clunkers car exchange program last year, you may have expected that a follow-up program aimed at giving people discounts on energy-efficient appliances would also draw attention. And it has.

If anything, the Cash for Appliances program was too successful for its own good. Faced with limited funds and huge demand, the program has created as much controversy as it has new business for once-ailing retailers.

How it works
Last year's American Recovery and Reinvestment Act authorized $300 million toward incentives for people to replace old appliances with new, more energy-efficient models. Each state was responsible for developing its own method of distributing its shares of the funds. The programs began as early as last December; a few states haven't started their rebate programs yet.

Experiences have varied greatly from state to state. In some places, demand was fast and furious. The Texas version of the program went through $23.3 million in just eight hours, while Massachusetts ran through its $6.2 million in just two hours. Illinois' $12.4 million lasted only 11 hours. Arizona quickly ran out of money for certain programs, and Iowa also went through its money in less than a day.

On the other hand, some states have seen less demand. New York still has money available after rolling out its program on Feb. 12. California's program is a couple of weeks old, and has used only about 10% of its allocated funds.

Part of the explanation for the uneven demand is in the details of the programs. Some states offered sizable rebates that dramatically cut the net cost of new appliances. Other states set rebate amounts at more modest levels, spreading the benefits to more people but diluting their effects.

Impact on business
One obvious beneficiary of the Cash for Appliances program is the appliance retail industry, which suffered as consumers pulled back from buying high-ticket items during the recession. From the beginning, Sears Holdings (Nasdaq: SHLD  ) got on the program bandwagon, offering to help customers take advantage of any rebates they were entitled to. With California's program, big-box retailers Lowe's (NYSE: LOW  ) , Home Depot (NYSE: HD  ) , and Best Buy (NYSE: BBY  ) were named official "platinum full service partners" in the program, along with a handful of local retailers, arguably giving them an advantage over other sellers.

With each of those big retailers having annual revenue between $40 billion and $50 billion, $300 million isn't likely to have a big impact. The same is true for appliance manufacturers General Electric (NYSE: GE  ) and Whirlpool (NYSE: WHR  ) , especially when you consider that appliances are a relatively small piece of GE's business.

But many said the same thing about Cash for Clunkers, with its initial $1 billion in funding and additional $2 billion. Yet the program went a long way toward helping Ford Motor (NYSE: F  ) earn strong profits during the quarter when the program ran last year.

In fact, the difficulties that some states have had in keeping up with rebate demand may have actually enhanced sales beyond expectations. Some customers who didn't manage to sign up for rebates likely ended up buying appliances anyway, spurring more demand.

A worthy investment?
Looking at Cash for Appliances purely as a stimulus plan is shortsighted in any event. Many believe that the underlying purpose of the program -- to encourage greater use of energy-saving appliances -- will more than pay for its cost over the long run. For consumers who don't always think of a return on investment that takes years to enjoy, the rebates simply helped them pull the trigger on what was already a smart purchase.

So even if Cash for Appliances was largely a nonevent for the big businesses involved, it definitely wasn't a failure. Although some would-be beneficiaries got only  frustration for their efforts, many will benefit from their purchases for years to come.

Are you tired of government bailouts for the big cats? Let Fools Morgan Housel and Ilan Moscovitz show you how you can end too big to fail.

Fool contributor Dan Caplinger got his rebate after fighting the computer for an hour. He owns shares of General Electric. Best Buy, Home Depot, and Lowe's are Motley Fool Inside Value choices. Best Buy and Ford Motor are Motley Fool Stock Advisor recommendations. The Fool owns shares of Best Buy, on which Motley Fool Options has recommended a bull call spread position. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy won't give you a rebate, but it's no clunker.

Read/Post Comments (2) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 04, 2010, at 2:48 PM, dstoller wrote:

    The cash for clunkers actually hurt Ford Motor. It was the only month that Ford did not add market share last year. Their profits came from many tough choices the company made, only a very, very, very small amount from this program. The overall program was a waste for the USA.

  • Report this Comment On May 05, 2010, at 7:27 AM, MrsCathyGF wrote:

    This very website ran the numbers on Cash for Clunkers as an abysmal loss. Noone is buying it, but the desperate who think the government should be a public checking account. The gov't is not there to act like our local Bargain store, handing out coupons. It's there to manage infrastructure, national security, and such, limited in such a way as to not get in the way of constitutional freedoms. Period. We can certainly manage to find our own auto and appliance bargains without the gov't's help.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1172725, ~/Articles/ArticleHandler.aspx, 10/27/2016 7:11:14 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:02 PM
BBY $39.29 Up +0.03 +0.08%
Best Buy CAPS Rating: *
F $11.88 Up +0.03 +0.25%
Ford CAPS Rating: ****
GE $28.87 Up +0.22 +0.77%
General Electric CAPS Rating: ****
HD $122.71 Down -0.63 -0.51%
Home Depot CAPS Rating: ****
LOW $67.37 Down -1.10 -1.61%
Lowe's CAPS Rating: ****
SHLD $10.94 Down -0.27 -2.41%
Sears Holdings CAPS Rating: *
WHR $149.52 Down -2.57 -1.69%
Whirlpool CAPS Rating: ****