Have you traded in your clunker?

Last week Congress passed a bill to extend the Cash for Clunkers program.  There has been some debate over the success of this program and whether it should have continued.

For auto dealers, the boost in potential car sales has helped.  But some argue this is a temporary blip and the sales would’ve taken place at some point in the near future, so the economic impact will be very short term at best.

I have to admit that the program made me think about trading in my 2005 Subaru.   Of course, based on my buying habits and taste, I’ll never qualify for the program since I can’t show any improvement in gas mileage as I always strive for some level of fuel efficiency.  It certainly was a sensible decision in light of last year’s gas prices!

However, there is a down side to the clunkers program that hasn’t gotten much attention.  Not-for-profits that were taking clunkers for donations are now suffering.  At a time when charities were seeing a decrease in cash donations, they are now also seeing a decrease in vehicle donations as well.

Do you think the Cash for Clunkers program is helping the economy overall?  Do you think it was a good idea to extend the program?  Tell us your thoughts.

– Mark Koziel

Comments

That article is so great! But aside from that breaking report let me impart new concern to you. People are on the lookout for economic signs. Economic signs aren't normally paid attention to when things are boom, but are under the microscope when bust. GDP, or Gross Domestic Product is a biggie. Home sales and house prices are also important, so are unemployment rates – and their declines have all slowed. Since most manufacturing (or production) has dipped, unemployment will continue to rise. (That's called Okun's Law, but its veracity is disputed.) Not many businesses have extra cash, or people for that matter. Most experts are predicting a recovery that will start soon, and complete by 2011. Despite the economic signs that the decline has slowed, many are out of work, and few easy loans can be had.

There has to be a cap on the Gov't spending. We can't all live off the government. There are about 90% of us working now, don't screw this up and make it worse for our children. This generation may have to make sacrifices, instead of "I want it all today" because it's owed to me.

There has to be a cap on the Gov't spending. We can't all live off the government. There are about 90% of us working now, don't screw this up and make it worse for our children. This generation may have to make sacrifices, instead of "I want it all today" because it's owed to me.

This is intended to stimulate now. Create sales now. A voucher for some time into the future doesn't do that. All dealers have access to all other dealers invnetory; always have. There are enough cars now to service this program.

All the government is doing is borrowing car sales from the future. This is no less of a scam than recording sales before the revenue is earned in order to puff up the income statement. What government program will the president and Congress need to implement next year in order to spur the new car sales that were moved to 2009? The president and Congress talk about the needs of the low income person, yet the cars that are being destroyed are just those cars that typically would have been affordable by those with lower income. Government has no business picking winners and losers; it always ends up messing something up, which leads to another program in order to fix the prior mistakes. Cash for Clunkers continues to perpetuate the problem.

I think that the Cash for Clunkers program will only create a temporary blip since it is only accelerating a decision that would be made at some future date. People are motivated by policy. If a person can benefit by trading in an older vehicle and get a credit that is higher than the value of the vehicle - it makes personal sense to do so. But as taxpayers we must pay for giving the credit. Moreover, it rewards those people that purchased gas-guzzlers. People who have been frugal and purchase vehicles with higher fuel mileage are ineligible for the program.

However, politicians are quick to recognize that many people see this as a good chance to save a few dollars. It is also a very visible program that directly benefits people and not financial institutions or insurance companies. So politicians will expand the program so that dealerships can enjoy this blip and the car companies can ramp up production. Six months from now, there will be no long term effect.

Cash For clunkers is just another name for transferring wealth! - I just love the idea of my tax dollars being given to the folks down the street! - yea right! - The feds have the power to tax and they are using that power without stop! - Why not a cash for clunkers program for my old computer ?? - Why not cash for clunkers for my old suits?? -

The government has to be limited some how - some where --- When are we going to get back to the fed just providing basic services - like just protection against enemies foreign and domestic and maintaining the roads!--Using the tax code to promote social actions and not just to raise revenue has always been a problem since 1913! --

But don't get me started -- So no -- I think the Cash for clunkers program is just another misuse of the tax dollars that I and my clients send to Washington

The Cash For Clunkers is another misguided federal program in that it deals with symptoms rather than root causes. To recovery the economy the answer is not more federal programs and spending but less. Cutting taxes across all levels of the economy will do more to stimulate a recovery than anything else. Right now cash is not freely flow because of fear - fear of joblessness, fear of being unable to sell goods and services, fear of governmental extensions into private lives. Although I would agree that Cash For Clunkers is a temporary blip, I disagree that there is no long term effect - someone will have to pay for the program. I don't suppose it will be the politicians.

Not in favor of the cash for clunkers program. Agree with above client from a post a comment that is just a transfer of wealth and feel a way to justify the automobile bailout. We are a capitalism state, and the automobile industry were for profit corporations that need to produce a product/auto that consumers want to buy and provide the quality and marketing to sell them. We are not at this point, and were not born as a country to be a socialist state.

This is just another program for Obama to throw money at the auto industry and stick us with an increasing debt that will cripple our economy to a point of a severe depression. Bailing out GM, and the federal government guaranteeing GM and Delphi's unfunded pension plans is a waste of tax payers money. With a twelve trillion dollar deficit every man woman and child is $40,000 in debt as a result of irresponsible leadership by both Republicans and Democrats. America needs to wake up and live within their means before our dollar becomes worthless, as we have a debt burden with absolutely no way to pay it back. This is no different than those who purchased houses on adjustable rates that they could not afford. We are headed in the direction of Pelosi's California - wake up before it is to late!!

I agree completely with John Bechtold's comments which he posted on 8/12/2009 at 10:43 am. This is another wasteful spending program that only benefits the auto industry while potentially harming those people in the country who need inexpensive transportation and charities who used the donation of old cars as a revenue source.

I do not believe Cash for Clunkers is an effective program for the following reasons:
- Nonprofits are suffering from the loss of donations
- Low income people could potentially have bought some of the clunkers that still were in decent shape and ran. They may not have a clunker to trade and likely still do not have a car.
- Destroying vehicles that run makes absolutely no sense.
- We're improving gas mileage only a few miles per gallon at the expense of filling our landfills. How green is that?
- I believe a rebate on cars with mpg of "X" (say 30) mpg - with no required trade-in - would have made more sense and would have encouraged changes.
- Shouldn't the rebate take into account "American Made" in some manner to encourage jobs growth?
- There is a lot of paperwork, which is expensive for the already stretched dealers to absorb this administrative burden.

This is just another example of an ineffective government program that was poorly planned and thought out before implementation.

I think it would be a great idea to allow vouchers for cars that are not in stock. I personally have spent the last five days looking for a Prius yet all cars in stock or to be delivered to dealers in the very near future have been sold, nationwide!! There are basically none left in the country!!! This is true of most of the best fuel efficient autos (both American and Foreign makers), also on a nationwide basis. Thus, if the goal is to replace "bad" cars with "good" cars, the outcome will be diminished or even stymied if a customer can't order a new highly fuel efficient car under this program because the new car can't be delivered soon enough to be considered "in stock".

Unfortunately, this clunker program is another opportunity for car dealers to take advantage of purchasers by refusing to discount the regular price of the vehicle and behave as though the $3500-$4500 is their gift to the consumer. Many are baiting and switching with advertised prices to get one in the door and then offer a price far greater than the advertised one even with the stimulus. This program has become one great shakedown for many car salespersons. It makes you sick!

JLC