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Cash For Clunkers: What’s Your Take?

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I didn't even get a chance to write about the Car Allowance Rebate System (better known as Cash for Clunkers) before the program before news came out last night that today may be the last day of the program. While the program was supposed to run until Nov. 1st, the 1 billion in funding for the rebates were used up in nearly a week. The Cash for Clunkers may be a victim of it's own success.

How Cash for Clunkers works (worked?)

The idea is that you can trade in any car that is less than 25 years old and gets fewer than 18 miles a gallon for a new car that gets at least 22 miles a gallon. The consumer gets an instant rebate between $3,500 and $4,500 (the dealer gets the money straight from the government, so they are on the hook if they don't fill out the paperwork). The trade-in has to have it's engine destroyed to prevent the dealer from turning around and selling the car. In reality, it's a lot more complicated than that, but that's the gist as far as how I understand it.

Am I the only one who finds this completely stupid? Please tell me I'm missing something here. It sounds like someone could be trading in a perfectly functional 10-15 year old car (i.e. little resale value) and get a great deal on a slightly more fuel-efficient car. The thing that gets me is that 17mpg in a functional car isn't that bad. It's useful and that value shouldn't just be destroyed. It just seems wasteful.

I love the idea of transitioning people to more fuel efficient cars, but let's widen the gap some to get people in real fuel efficient cars. (Actually, that's exactly what some law-makers are proposing.) This also has a hint of printing out stimulus checks and giving it to everyone. So the people have more money and are buying more stuff... That money is just more government debt, which means the value of the dollar just went down some more.

How My Cash for Clunkers Would Work

I think we should work towards making one or two super cars. Since, as an American taxpayer, I seem to own a portion of GM (thanks bailouts), hopefully someone is listening (even if they reject my idea). These super cars would get great mileage via plug-in electricity and hybrid technologies. They would be cars that everyone would want to drive. Maybe the upcoming Chevy Volt is the answer to the fuel-efficient question. A car that everyone wants to drive may sound far-fetched, but the Honda Accord has enjoyed that status for some time. I'd go as far as commission Apple to design an iCar to use as a decent starting point. The super cars would also be affordable - especially because we are going to make them in bulk. Finally the super cars must also come in a convertible option... hey it's my idea so I'm going to make that non-negotiable.

Then I'd offer a Cash for Clunkers deal where you trade in your inefficient fuel car and get a good deal on one of these super cars.

What do you think? Is the current idea of destroying working cars the right one? Do you think the Cash for Clunkers program is just a short-term solution to a poor economy that might have economical problems down the road? Or is it the long-term answer we've been looking for?

[Finally, I should mention that the program might only end temporarily while more funds are being allocated. It seems like the government is working at a furious pace to do so (news of this might already be out by the time this article is published).]

Posted on July 31, 2009.

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23 Responses to “Cash For Clunkers: What’s Your Take?”

  1. I have no clue why congress is surprised that the money has run out.

    “What? You’ll pay me a lot more than blue book for my car? Oh, I don’t know. Let me check with my spouse …”

    My idea is electric without the batteries. It would work similar to the way dodge cars at an amusement park work, except that instead of having a conducting device connect upward, it would connect downward, to a power source embedded in the roadway (or possibly use WiTricity to seed the air with electricity bubbles). Cost could be a big issue, though. It would probably make the most sense to start with the more heavily traveled roadways and eventually branch outward.

    Clearly, there are also a few technical hurdles.

  2. Lazy Man says:

    What about this…

    It’s the road that moves… the cars are stationary. :)

  3. :)

    I do think that taking a closer look at the roadway could be key. I wonder if some sort of a rail based system (similar to a subway, with an electrified rail) would be feasible. One issue would be the ability to pass, without derailing.

  4. ryan says:

    Here is how it worked for me. The transmission on my 2001 Honda Odyssey failed 90 miles from my house on the way to visit my grandparents. This was already a replacement transmission with just over 40K miles on it. My van had 123K miles on it, and it was out of warranty. I towed the car to a dealer and traded it with the CARS program. I am getting twice the gas mileage, but now I have a car payment (albeit with 0% interest…)

    My van technically ran. Just barely and not well, and a new transmission would have cost close to 2K plus labor, I could not justify trying to keep it going any longer, as it is my main transportation for my family.

  5. Brent says:

    You’re right, it is a stupid program. Basically, we the taxpayers are subsidizing someone’s car purchase. When we say, “the government reimburses the dealership”, that means we are reimbursing the dealership. Anyone with a seldom-used car that meets the criteria can basically upgrade at a discount.

    And why destroy a perfectly good engine? I hear that they run some sort of chemical through the engine that completely wrecks it. Couldn’t you at least scrap it and resell the parts? Or why can’t the cars be resold or auctioned off to people who have no car so that they can get to work, be productive, and add value back to the economy?

    Anyway, I heard that a lot of dealerships I getting hung out to dry on this since the government may not have enough money left in the program to reimburse them. So, if the federal government can’t do something that is essentially a glorified promotion, how much confidence do you have in them to run our health care?

  6. Cash for clunkers is a green washed pork barrel. The net effect is $1,000,000,000 is injected back into the auto industry and a bunch more cars get moved off the lot and onto the road. Then the government tops it all off with a pathetic 4 MPG improvement this is a slap in the face of the intelligence of the American people. The people that bit the bait now have extended their indebtedness another 5 years. They should have taken that $1B and stuck it back into alternative energy R&D. It would have gotten us a lot more bang for the buck.

  7. Randy says:

    If they were supercars that everyone wanted to buy, why would you need an incentive to sell them?

    The idea was supposed to be to sell more fuel efficient cars, but that’s a laugh. Truck & SUV sales are up (since gas prices are down) and Toyota closed it’s Prius plant before it even opened.

    At the risk of tooting my own horn, I posted on this subject this morning. See http://newfromclt.blogspot.com/

  8. Nathan says:

    [blockquote]Here is how it worked for me. The transmission on my 2001 Honda Odyssey failed 90 miles from my house on the way to visit my grandparents. This was already a replacement transmission with just over 40K miles on it. My van had 123K miles on it, and it was out of warranty. I towed the car to a dealer and traded it with the CARS program.[/blockquote]

    So in this case the government either took money away from a repair shop that would have repaired the car or paid the dealer to sell you a car you were going to buy anyway. The net result is money out of the economy

  9. chris says:

    This was quite predictable. Shouldn’t turbo-tax-Tim have sat himself down with a pad of paper and a pencil and done some figuring before letting this one loose? I find it more economical to drive your car until it blows away as a pile of rust. The government is perpetuating the myth that everyone needs a shiny new car plus a loan floating along with it. People who voted for that idiot are getting what they wanted….CHANGE!

  10. Mike Dunham says:

    And people think the government can run health care, when the NHTSA can’t even do basic math.

  11. Brian says:

    Glad to hear there is some common sense with these comments. The CFC program is garbage. Taxpaying citizens get the short end of the stick yet again. Our government is one of the most incompetent and corrupt organizations in the world. The time is here to rise up and demand true change. Kick these idiots out of office!

  12. Candace says:

    Brent is right.

    LazyMan, your post doesn’t begin to touch on the complicated nature of this entire program.

    The dealers and the employees themselves have so many hurdles to jump through, massive paperwork to fill out, approvals to get from phone numbers that just ring or are terminally busy, and had to attend webinars and classes to understand and be in compliance with the federal regulations imposed on the dealers and upper management. It is not so cut and dried about which vehicles are eligible for trade. And the dealers are on the hook to the federal government tune of enough money to buy a good car if they make one mistake on an ineligible trade, or on the paperwork. And believe you me, the paperwork is less than clear and very complicated.

    Think on this:

    Not only is the program ineffective at doing much if anything for the environment, car manufacturers have spent much money on advertising and hyping the Clunkers program….only to have the government that desires to bury our economy end the program within 5 days of it beginning. What’s the motivation there?

    At which point, dealers realized that the government didn’t even create a way to track the money that was used, the right hand had no idea what the left hand was doing, probably still doesn’t. They can’t run a basic incentive program, the likes of which car manufacturers have been running successfully themselves for many many years, and they want to run health care? What a crock.

    Here’s another main point to consider.
    And it is one that should make people pay attention to what is going on in our country. Things are being done with the appearance of helping, but the intention of hurting.

    If you take all new car sales in the US (prior to the economy taking a dive) and divided them up, they total more than $1Billion a week. That’s right, prior to the economy being sabotaged, new car sales in the US were topping $1Billion dollars a week in the US. And the government expects us to believe they are going to stimulate our economy until November by infusing car sales with a $1Billion dollar incentive???? The money lasted all of 5 days…which shows you, that again, either complete morons are trying to “help” the economy or they have other intentions entirely while trying to make it look like they are “stimulating” the economy.

    Who does the math for the government?

    And this is just the tip of the iceberg with the clunkers program. There is so much red tape on each deal you can’t believe it.

    Color me beyond disgusted.

  13. Candace says:

    Forgot to say….our paperwork tells us that the trade-ins must be crushed within a set number of days.
    Not the engine destroyed, the entire vehicle crushed.

  14. Candace says:

    Ford is selling a hybrid vehicle right now that goes 700 miles on one tank of gas.

    Why do people continue to ignore the one company that didn’t take one dime of government/tax payer money, yet wait longingly for GM and Chrysler to make the miracle vehicle?

    Come on now…the government owns GM and Chrysler….they’re gonna make what Big Brother tells them to from now on.

  15. Lazy Man says:

    Thanks Candace,

    I would have gone into more, but I really didn’t have time to research the program in full detail. Much like my MonaVie article, something seemed really a miss and few people seemed to be speaking out against it.

    As for Fords, I have owned one since 2001. As for the Ford Fusion Hybrid, I don’t see the plugin option that the Chevy Volt will have. Now, I don’t know if it’s really more efficient to plug in your car (electricity has to be generated by something, right? – unless you live on solar power), but it seems like experts think that is more efficient.

    I guess I feel that the companies that took government money have more responsibility to do something useful with it. :-)

  16. Candace says:

    Thanks for the good post, LM.

    I agree that companies that took our tax dollars and government bailout should be held to a very high standard. I won’t hold my breath.

    We’ve been in the new car biz associated with Ford for about 25 years now. I wish I could say more, but I can’t…Ford has some absolutely amazing innovations in the works right now. Watch for it.

  17. John says:

    It does nothing to vitalize our transit system, i.e. high speed rail.

    1st The government could use truck freight fees to offset costs and divert moneys to repair / upgrade the rail system.

    2nd Lower the size and weight on trailers to use more drivers (jobs) to haul road freight. Makes the highways $afer too.

    3rd Limit all truck drivers to an 8 hr shift total, including load times and provide incentives to use the rail freight and stop with the highway projects that widen intersections as large as Wal-Mart parking lots.

    There’s a better way of doing all this; we just have to figure it out.

  18. Rob says:

    What about the people that never buy new cars. Since all the good used cars traded in under this program are being destroyed, it is going to create a shortage of used cars in the under $4000 price range.

    As someone that has been shopping for a good used car for my 16yr old son, I hate to see the pictures on the news of all those good used cars being destroyed.

    What a waste.

  19. John says:

    Supercars would be great. I’ve owned my last car 14 years, but would keep it longer. I did’t trade it but sold it outright and stimulated my economy into useful cash. Ah, life is good. I also parted out two former Jeep Wagoneers for more than I paid for them after driving them for many years. It’s amazing what people will pay for that stuff.

    Supercars should last 30+ years and be reparable for the life of the owner.

    People who buy non-Supercars should have to pay a “National Debt Reduction Fee” of $5000 when they buy their choice and $10,000 when they buy a Hummer, a totally wasteful vehicle.

  20. Tim says:

    When the data comes in and the dust has been wiped away, as in any of these kinds of programs, we’ll see some significant abuses of the system.

  21. Teri says:

    I don’t think the Republicans hold a candle to the miss use of the tax payers dollars as the Democrats. It’s cash for clunkers now, and next its the Healthcare Reform, I just see communism creaping its way into destorying the very foundation that the USA founding father’s created…DEMOCRACY!

  22. Jessica says:

    I’m really surprised they’ve released NO data on how much tax money is expected to come back into the system vs. the $1 billion. I would think that would be the first thing they did.

    Also, while I’m suspect of the whole idea, I’m fine with destroying the cars. They’re stripped for parts first, and they’re basically crap. If a car gets less that 19 mpg, I don’t car how much you like used cars, it would be foolish to purchase one. I highly doubt anyone is trading in something awesome like a Gran Taurino or anything that could have actual resale value. Plus the parts from crushing become building material, sold by an American company, which pays American taxes on their profits, so there is that boon. But having only a 4 mpg difference is pretty stupid.

  23. Otto Maddox says:

    This program does two things we should be avoiding right now. It puts you back in debt or extends the debt you have all ready. If your car is payed for, why would you junk it and take on another car payment and increased insurance just to save a few bucks at the pump?

    President Obama talked of building the economy from the bottom up but they are doing the opposite. They take our money and give it to the banks and we are supposed to go borrow it AND pay interest.

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