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Cash for Clunkers

Tom PattonSomebody please pay me to buy a car!

One of these days there will be one of these stimulus programs for which I can qualify, but I haven’t found one yet.

The "cash for clunkers" program is a genius idea that gives people a credit of $3,500 to $4,500 to trade in their old car for a newer, more fuel efficient model. There are restrictions, of course. The “clunker” has to get less than 18 miles per gallon (combined) and be less than 25 years old. You have to buy from a participating dealer, and the credit does NOT count as income for tax purposes. Dealers also have to give you any other rebate or special offer.

So, here we go again. I don’t have a clunker. Well, I kinda do, but I’m not ready to part with the Explorer, and it’s really not a clunker. Besides, the last thing I need is another payment, and my clunker is paid for.

I realize that the car business is in the doldrums. And I guess if the government mostly owns the car companies, at least the American ones, they can offer a rebate program if they want. Of course, it’s not just GM or Chrysler cars that are eligible.

But it’s not just the car business that’s in the doldrums. Lots of businesses are in the doldrums. And there are a lot of people in the doldrums as well.

Now consider for a moment that the people who are driving these so-called “clunkers” may have some difficulty qualifying for a loan. They may, in fact, be the least able to make a payment. It won’t be the case for everyone, of course, but I’m thinking that even if I HAD a clunker I was interested in trading in, the last thing I need at the moment is another payment. I wonder how many of those new cars will wind up on a repo lot and then at the auction. Yes, it will reduce inventories on car lots, but is it responsible? I guess we won’t know for a while.

Meanwhile, I’m not only paying for my car, I’m helping other people buy cars too.

I’m helping people buy a lot of things. For instance, there’s a tax credit for first time home buyers here in Florida.

And so it goes. One program after another that leaves out people who are struggling and barely getting by, but they are getting by. I understand that helping people buy cars helps the workers who make the cars and all the ancillary jobs associated with that. But I’m not at all convinced that the government is going to spend us out of this recession. The way to spur businesses to hire workers and invest is to cut business taxes. When you look, historically, it works every time. Business could spend us out of this recession, given an opportunity, but government? Color me skeptical.

President Obama said Friday that signs are pointing to a recovery. The unemployment rate fell to 9.4% nationally, and fewer job losses were reported, but there are still losses -- 247,000 newly unemployed in July, which is better, but still not great. Much of the workforce still wonders if this week will be their last at their job. Helping someone buy a new car might increase someone’s personal consumer confidence, at least in the short term, but how confident can you be when the only way to clear automobile or housing inventories is to wait for the government to hand you money to do so. What happens when those programs go away? Do people then put off a major buying decision waiting for the next government program?

The way to end the recession, it seems to me, is for people to be back at work earning enough to pay their bills. Businesses have to feel confident that they’ll be able to sustain their workforces before that situation will begin to stabilize. “Cash for Clunkers” makes a great sound bite, and in the short term, might at least move some inventory off car lots.

But in the end, is it an economic Twinkie? Momentarily satisfying, but very little substance and requiring several hours penance at the gym? The buyers trading in their clunkers need to be sure they’ll be able to keep up the payments, and that part is, at this time, far more difficult to sustain.

6 Responses »

  1. If you're in the mkt. to buy a car $4500 credit is terrific. Billions for people who can easily afford to buy a car is outrageous. Taxpayer bucks. We own car companies and provide cash for trade in and then Obama takes credit for good business. We objected, he signed the bill. Who's going to find spare parts for their clunkers. Nobody takes into consideration both sides, just spend our money.

  2. How is this a brilliant program. Once again the government is rewarding people for stupid decisions i.e. buying a big gas hog. And the ironic things is many of these people are trading their "clunkers" in for another 4 truck that gets a mere 4 miles per gallon more. How is this good for those who have made responsible correct decisions who will now have to subsidize these people just like the housing market.

  3. This is another example of the hypocrisy currently dominating Washington. On one hand they are pushing mass transit projects as the way to get the economy back on track, but on the other hand they spend 5 times what they've allocated for those transit projects on saving GM and reviving auto sales.

  4. Let me add my $0.02 worth.

    We don't need another "gummint" program to get clunkers, or anything else, off the road. We need government to get out of the way (i.e. - lower taxes).

    I own a Clunker - a 1999 Ford Expedition with 63,000 miles on it. It runs great, I've had very, very few problems with it, and everything on it works as it's supposed to. Oh, the most important thing - it's paid for. I'm not about to trade in a perfectly good automobile. I don't want the payment, and I don't see why my perfectly serviceable automobile should be destroyed.

    Since I drive only a few thousand miles a year it would take me years and years to recoup the difference in gas savings.

    This is yet another example of the "ready, fire, aim" approach to problem solving that our government "leaders" take.

  5. If you’re interested CNBC has put together a slideshow which lists the most popular trade-ins and new vehicles purchased under the CARS program. You can check it out here: http://bit.ly/18hGVt
    Thanks!

  6. Unfortunately...I missed the "CFC" program... but then again? my new Pontiac G8 doesn't qualify...It's the last Pontiac MUSCLE CAR! ... lousy mileage...But...HELL this thing is fun to drive!!! FUN IS NOT CHEAP! have fun with your little Jap cars...I'll blow your doors off with my Pontiac!...you SHOULD have bought American. We ALL notice who bought Jap and who bought USA......see you at the red light!