Tuesday, August 4, 2009

Something Stinks Under The Hood

Cash For Clunkers good? In one way, "YES". It did boost sales, and probably had a lot to do with a big gain for Ford (The Ford Focus is the most popular car purchased through the Clunkers program). But the answer may be "NO" on other fronts.

Consider car dealers, though happy about the foot traffic on their lots, are not pleased with the process. Many have complained about confusing instructions, and difficulty getting through the online application for reimbursement. In fact, the Department of Transportation, who oversees the program, acknowledged big challenges in managing the flood of requests from dealerships, by announcing 300 new contract workers would be hired to help the flow-through. I guess the DOT didn't already have enough salaried workers who could pick up the slack.

Here are some unintended consequences of Cash for Clunkers: Read here how charities complain about cars that would have been donated to their groups are now, at the direction of the DOT, being junked by dealers. Charities also worry that working families are being impacted as affordable used cars are being taken out of the market. Also, as Edmunds.com points out in their analysis of the program, that even though $4500 and $3500 rebates are offered to consumers who trade in qualifying clunkers, it may actually cost the government as much as $45,000 for each transaction.

Is it just me, or does any of this hoist a red flag for you? This is the same government that wants to manage your health care.

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  1. Phil, you're just scratching at the tip of a huge iceberg. Other issues to consider:
    * The money comes from other taxpayers - shouldn't our tax dollars be used for National (ie, Constitutional) issues, such as defense, and not for cars?
    * If giving people $4,500 tax vouchers for consumer goods is a way to jump start the economny, why not give everyone a voucher? After all, isn't a new fishing boat the same as a new car? What if you need a new sofa or kitchen appliances?
    * The trade-ins are crushed, so their parts are not available for the low-income population who cannot afford a new car even with the voucher.
    * The Wall Street Journal called this "crackpot economics". I think that's very polite.

  2. For sure. Times is tough, and a lot of people need/rely on used cars to get them through the day. Those vehicles could have gone to much better use than the scrap heap. But the gov't believes ending is better than mending...

  3. didn't know that this "green" administration thinks crushing perfectly usable cars so people can buy new ones offsets the carbon footprint...hypocrites.