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Paul Price
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Dr. Price writes about stocks, options and the market every weekday on Real Money Pro, a subscription site onTheStreet.com. Paul has been a speaker at the International Traders Expo in New York City and the Options and Forex Expo in Las Vegas. He also gives investment seminars for subscribers of... More
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  • Subject: Cash for Clunkers  5 comments
    Sep 9, 2009 12:29 PM

    I guess I must be on the wrong page…


    A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.


    A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.


    So, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year.


    They claim 700,000 vehicles – so that's 224 million gallons / year.


    That equates to a bit over 5 million barrels of oil.


    5 million barrels of oil is about ¼ of one day's U S consumption.


    5 million barrels of oil costs about $350 million dollars at $75/bbl.


    We spent $3 billion to save $350 million.


    How good a deal was that ?


    They'll probably do a great job with health care, though.
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  • Plant the seeds
    , contributor
    Comments (227) | Send Message
     
    This didn't save enough gas to justify as you point out. But this did clear dealer inventories and as a result dealer jobs. It did stimulate Japan more than the US (thoough Toyota had been cutting production in the south).
    9 Sep 2009, 01:12 PM Reply Like
  • Gravity404
    , contributor
    Comments (375) | Send Message
     
    Paul, again, excellent thoughts. I was told by a dealer that there was 20 pages of forms and average of 3 day wait to complete the transaction. So, healthcare will be a piece of cake!

     

    Plant the s...correction - It created dealer jobs for 3 - 4 weeks. Their unemployeed again and there are 700,000 cars that will not get sold over the next few months.
    9 Sep 2009, 02:37 PM Reply Like
  • tripleblack
    , contributor
    Comments (13440) | Send Message
     
    We also threw away about $500million in perfectly good, functioning vehicles.

     

    Keep in mind that the engines were treated and forced to seize BEFORE the vehicles were then crushed, to insure that no salvageable parts came from the mostly American-made used cars.

     

    If anyone wonders why the perception of the buying public after all this is that the government is subtly hinting that we should all buy imports...

     

    Well, its hard to blame them.
    9 Sep 2009, 03:00 PM Reply Like
  • Plant the seeds
    , contributor
    Comments (227) | Send Message
     
    If the dealer was going to sit 1 years of inventory, a lot more heads would have rolled than what they did. They have to keep financing unsold cars.

     

    Not all the cars sold were to people that were planning to buy soon, I agree that sales will drop in the next few months

     

    On Sep 09 02:37 PM Gravity404 wrote:

     

    > Paul, again, excellent thoughts. I was told by a dealer that there
    > was 20 pages of forms and average of 3 day wait to complete the transaction.
    > So, healthcare will be a piece of cake!
    >
    > Plant the s...correction - It created dealer jobs for 3 - 4 weeks.
    > Their unemployeed again and there are 700,000 cars that will not
    > get sold over the next few months.
    9 Sep 2009, 05:30 PM Reply Like
  • Gravity404
    , contributor
    Comments (375) | Send Message
     
    Plant - your first post is accurate regarding US vs Japan. However, these domestic dealers aren't paying for their inventories except the taxes. While the cash for clukers stimulated forgein auto sales, toyota shut down its brand new billion dollar Tundra super cab plant in San Antonio. Honda shut several plants in Tenn and Ala. And likewise for Nissan and BMW.

     

    My point was that it did absolutely nothing for job creation in the US. And triple black has an excellent point, there is a 10 billion market for used parts, especially older american parts. The government just dramatically increased the price for older American parts.

     

    Now we see how Obamanomics works...
    10 Sep 2009, 09:19 AM Reply Like
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