Cash for Clunkers Meant for Detroit, Not the Environment

By today’s standards it’s small potatoes but a billion potatoes here and a billion there and pretty soon… well you know the quip. I’m talking about the “cash for clunkers” bill that was approved today as part of an add-on to funding for the Iraq and Afghanistan wars.

This has been billed as an environmental initiative to get gas guzzling older cars off the road and provide an incentive to buy more fuel efficient autos. It is nothing of the sort. It’s basically a $1 billion (estimated cost) subsidy to the auto industry.

Here’s how it works.

First, you get $3500 if you trade in a car that gets less than 18 MPG for a car that gets 22 MPG or more. If the new car gets 10 MPG more than the trade in you get $4500. So far so good.

If you own a SUV, pickup truck or minivan you get a better deal. If your vehicle gets less than 18 MPG you qualify for $3500 if the new vehicle you buy gets 2 MPG more than the one you trade in. If it gets 5 MPG or more than that old truck you get $4500.

A couple of things that were left out. Some wanted a rebate for anyone who traded in a car that got mediocre mileage, say 20 MPG, for one that got 35 MPG. Those same proponents also wanted to make used cars available so someone that is driving around a 25 year old Impala might be able to trade up to, for instance, a 2005 Toyota (TM). That would get a real stinker off the street and might be affordable with the rebate for the poor guy that can’t afford a new car. Those were evidently too “green” for the Senators.

So for all of the bluster you’ll hear about this keep in mind that it’s structured to help the auto companies sell more SUV’s, minivans and pickup trucks. After all that’s where the money is made in the car business and we, the taxpayer, are now in the car business. I can’t figure out exactly how we come out ahead providing a subsidy for the companies we own but I’m sure Congress has assured themselves that it’s a net benefit to someone.

On, just one more little wrinkle. In case you think this is the perfect time to dump that Hummer you bought during a testosterone rush last summer forget about it. Any trade-in is worth nothing. That’s right, nothing, zero, zilch, nada. Trade-ins can’t be resold, they have to be scrapped.

Sorry!

Comments

[springfieldlp]

Actually the bill will not even achieve an increase to auto sales. The best way to do that is to simply provide a $5,000 income tax credit to anyone that buys a new North American built vehicle within the next 18 months. That will get the economy moving again pure and simple and, in the end, it will not cost the government any lost revenue because the economy will be running again. An economy that is working generates tax revenue unlike the one in which we are in now.

2009 Jun 19 09:35 AM

[User 433976]

your solution is too simple. The government needs red tape, loop holes, deals, attachments to other bills.... back in the beginning of all this mess I thought if ever tax paying family got a $250K loan guaranty by the government. Payment back would be in form of a life insurance policy to pay the government at time of death. That money would pay off houses, buy cars, and really make thing happen. The government is only taking care of the rich and has forgotten about the people. The people is the key of getting us out of the current economy

2009 Jun 19 10:12 AM

[Jeff B.]

Once again, our elected officials pretend to work for the taxpayer, but instead take care of their $$$ sources. This is disgusting.

2009 Jun 19 10:28 AM

[belseware]

Actually, Mr. User 433976 isn't far off with "The government needs red tape, loop holes, deals, attachments to other bills.... "

Right, Mr. Lindmark, that the environmental aspect is BS. This is for Detroit (Tokyo, Hamburg, etc.), and it is also for Big Brother Sam. Buy a car you can't afford, go deeper in debt, get in financial trouble, voila'--another needy constituent who can be saved to vote democRAT.

Disclaimer: This apparent unwarranted sterotyping of Democrats is for effect, and the author realizes there are many thoughtful, sincere and/or misguided souls out there. But they must be wondering what they wrought at this point....

2009 Jun 19 10:38 AM

[303820]

We wouldn't be in this mess if "we the people" would've protected our own by buying AMERICAN instead of buying 3 million imported cars and trucks from countries that won't have anything to do with our manufactured goods!!!!!

WAKE-UP AMERICA!!!!!!!!!!!!

2009 Jun 19 01:49 PM

[speeddaimon]

Or maybe we wouldn't be in this mess if American car companies had designed cars that people wanted to buy. Face it, up until very recently quality of American cars has been complete crap. Japanese car companies figured it out in the 80s. I own a Subaru and I'm damn happy with it.


On Jun 19 01:49 PM 303820 wrote:

> We wouldn't be in this mess if "we the people" would've protected
> our own by buying AMERICAN instead of buying 3 million imported cars
> and trucks from countries that won't have anything to do with our
> manufactured goods!!!!!
>
> WAKE-UP AMERICA!!!!!!!!!!!!

2009 Jun 19 04:01 PM

[303820]

AMERICAN CAR COMPANIES WERE BUILDING CARS THAT PEOPLE WANTED...SUVs...THEN SOMEONE DECIDED NOT TO DO ANYTHING ABOUT THE $4.50GL GAS THAT KILLED THE SUV MARKET AND OPTED TO ENRICH HIS OIL BUDDIES INSTEAD!!!

BTW IN THE LAST 10 YEARS QUALITY AT DETROIT AUTO HAS BEEN AS GOOD OR BETTER THEN THE ASIANS RUST BOXSES!!!


On Jun 19 04:01 PM speeddaimon wrote:

> Or maybe we wouldn't be in this mess if American car companies had
> designed cars that people wanted to buy. Face it, up until very recently
> quality of American cars has been complete crap. Japanese car companies
> figured it out in the 80s. I own a Subaru and I'm damn happy with
> it.

2009 Jun 20 09:47 AM

[303820]

SELF DESTRUCTION IS THE ONLY THING WE'RE GOOD AT!!!

2009 Jun 20 09:48 AM

[Chancer]

I have not seen any details, like a requirement that you had to own the clunker for a set period of time.

I could buy a clunker for $500 or less, and get up to $4500 in voucher value for a new car. Right?

I have a low mileage(43,000) 2000 Camry that Toyota dealer offerred me $5,000 cash for with no expiration on the cash offer.

I could sell Camry to dealer for $5,000 cash.
Buy clunker for 500
Get a voucher on trade-in for 4,500
Buy new Scion for 16,000
Net cash cost 7,000

Or just keep driving Camry for another 10 years, since I drive it less than 5,000 miles per year. I also have a backup 1992 Toyota 4WD pickup with 100K miles that I drive less than 1,000 miles per year.

2009 Jun 20 06:29 PM

[Tom Lindmark]

Sorry, they anticipated that. You have to have owned the car for a year and have insured it for a year.


On Jun 20 06:29 PM Chancer wrote:

> I have not seen any details, like a requirement that you had to own
> the clunker for a set period of time.
>
> I could buy a clunker for $500 or less, and get up to $4500 in voucher
> value for a new car. Right?
>
> I have a low mileage(43,000) 2000 Camry that Toyota dealer offerred
> me $5,000 cash for with no expiration on the cash offer.
>
> I could sell Camry to dealer for $5,000 cash.
> Buy clunker for 500
> Get a voucher on trade-in for 4,500
> Buy new Scion for 16,000
> Net cash cost 7,000
>
> Or just keep driving Camry for another 10 years, since I drive it
> less than 5,000 miles per year. I also have a backup 1992 Toyota
> 4WD pickup with 100K miles that I drive less than 1,000 miles per
> year.

2009 Jun 20 07:23 PM

[a. palmer jr.]

American car companies TOLD us that we were building cars that we wanted. Their ads were fabulous! Now, really, do you really prefer that big, ugly, SUV with 4 wheel drive that you don't need in town that guzzles gas that you can't afford? I know I don't. American car companies were fleecing us by selling us what they wanted us to have, which was the most profitable thing for them. That they squandered all that money is another story.

2009 Jun 20 08:36 PM

[slowdown]

Absolutely - From November through March. Car's are great in the summer...but all wheel or four wheel is a must for me in the winter. I sucked into doing the "right" thing and bought a car. Worst mistake ever and since I can't afford to have two vehicles I'm going back to the SUV. It's not worth the extra mileage when you are driving 52 miles one way on snow covered roads that aren't being plowed properly because every municipality is out of money. Thanks but no thanks to the cars...they don't meet my needs.


On Jun 20 08:36 PM a. palmer jr. wrote:

> American car companies TOLD us that we were building cars that we
> wanted. Their ads were fabulous! Now, really, do you really prefer
> that big, ugly, SUV with 4 wheel drive that you don't need in town
> that guzzles gas that you can't afford? I know I don't. American
> car companies were fleecing us by selling us what they wanted us
> to have, which was the most profitable thing for them. That they
> squandered all that money is another story.

2009 Jun 21 11:18 AM

[slowdown]

First - the only people that will benfit from the program are those that own cars/trucks that are worth less then the tax rebate ($4500.00) which are generally older vehciles with lots (over 100K) miles on them. You know the ones...typically emitting black smoke out the back as they roll down the highway. There is no upside for someone owning a newer vehilce. If it is enough incentive to get the average joe driving those to trade in for a new cleaner burning car/truck...then I'm okay with it. If it helps get this stupid economy jumped started...then I'm okay with it.....if it keeps one more person from losing their job...then I'm okay with it.

2009 Jun 21 11:32 AM

[ex- bond trader]

The bill should be called, "cash for unions". O's just looking out for O
in 2012.
Can you cash out the O clunker? Please????????

2009 Jun 22 12:20 AM

[Chancer]

It is interesting to hear that the new Chrysler is going to sell a car next year that costs $5,000 and get 50 mph- made by Fiat..

Chevrolet sold a car like that in 1985. We bought one. It was a Chevy Sprint built by Suzuki.


On Jun 20 08:36 PM a. palmer jr. wrote:

> American car companies TOLD us that we were building cars that we
> wanted. Their ads were fabulous! Now, really, do you really prefer
> that big, ugly, SUV with 4 wheel drive that you don't need in town
> that guzzles gas that you can't afford? I know I don't. American
> car companies were fleecing us by selling us what they wanted us
> to have, which was the most profitable thing for them. That they
> squandered all that money is another story.

2009 Jun 22 04:11 PM

[Mad Hedge Fund Trader]

But it's the environment that is winning. Perhaps it was the newspaper gene in me that made me screech my car to a halt when I saw a near riot in progress at my local total Toyota dealer. The showroom was more jammed than the unemployment office, with eager salesmen recalled from vacations manning card tables set up in every available space. I managed to grab one peripatetic salesman by a lapel, who gushed that they sold 45 cars yesterday, compared to ten for a normal Friday, and that 35 of these were due to the Cash for Clunkers program. Sure I could get a $4,500 credit for my 1995 BMW (17 mpg), and apply it to a new Prius (50 mpg), taking the price down to $19,500 and the monthly payment to $450/month for five years. In fact, the government stimulus program was so successful, that it ran out of money in the first four days, and congress rushed to triple it to $3 billion on Friday. It was like the survivors of a ship torpedoed at sea were swimming frantically for the only piece of wreckage that floated. Assuming that the average car drives 10,000 miles a year, and the average swap generates a mileage improvement from 15 mpg to 27 mpg, junking 750,000 clunkers will save 30 million barrels of crude a year, 1.5 days of our total annual consumption, or three days of imports. I asked to see the cars that were traded in and was told that the lots for the dealer, the used cars, and the detailer were all full, but I could see some if I went to the Target nearby where they were renting extra spaces. There I saw the fleet condemned to clunkerdom, GM Safari’s, Jeep Cherokees, Buick Regals, Dodge Ram pickup trucks and vans, and Chrysler minivans by the dozen, all with “CFC” marked on their windshields, a certain death sentence. These sorry excuses for transportation will never belch blue smoke, nor drip oil on our interstates again. I can’t imagine a sorrier commentary on the management failure of the US car industry for the last 30 years.

2009 Aug 01 04:35 PM