Predictably, the US Department of Transportation has nothing but praise for the program, but where did the $1 billion oops, $2 billion oops, almost THREE BILLION dollars of our own money get spent ($2.877 billion)?
Top 10 New Vehicles Purchased
- Toyota Corolla
- Honda Civic
- Toyota Camry
- Ford Focus FWD
- Hyundai Elantra
- Nissan Versa
- Toyota Prius
- Honda Accord
- Honda Fi
- Ford Escape FWD
Top 10 Trade-in Vehicles
- Ford Explorer 4WD
- Ford F150 Pickup 2WD
- Jeep Grand Cherokee 4WD
- Ford Explorer 2WD
- Dodge Caravan/Grand Caravan 2WD
- Jeep Cherokee 4WD
- Chevrolet Blazer 4WD
- Chevrolet C1500 Pickup 2WD
- Ford F150 Pickup 4WD
- Ford Windstar FWD Van
Average rebate: $4,170, though very few have been paid.
What’s funny/odd/interesting is the praise the Federal government has for foreign car manufacturers with plants based in the US.
“Cars made in America topped the most-purchased list, from the Ford Focus to the Toyota Corolla to the Honda Civic.”
Since when did Honda and Toyota become “American Made?” I agree that they are technically “American Made” since they’re assembled in the US, but the profits from those vehicles go overseas. Maybe the Federal government should take over the foreign car companies …
Here’s the rub, despite the praise, will the purchase of these new vehicles actually spur our economy? I don’t think so, at least not for the long term. Why?
The spending flurry this Congress is initiating is lowering the value of US dollars. As a result, oil prices are rising despite increasing supplies. Could this potentially cancel out the predicted fuel savings from the increased fuel efficiency of the new cars Americans bought through the program? Maybe. The Transportation Department claims that the US will enjoy an increase in fuel economy but fails to mention how much. If it was substantial, you can bet it would have been mentioned.
What’s the real economic impact?
Beyond the claim of “saving 42,000 jobs” (which is dubious at best), I’m curious if anyone is concerned that we’ve baited the American consumer into going into more consumer debt on an item that loses value the day you drive it off the lot. Does anyone really believe that the 404,046 cars and 280,895 trucks that were purchases were NOT financed? In an era when it appears that our society is actually beginning to learn the dangers of consumer debt, the Federal government swoops in to tempt us to buy more depreciating “assets.”
In addition, though the Cash for Clunkers program isn’t Federally taxable, some states may view the benefit as something taxable. Given the budget squeeze many states are experiencing, I wouldn’t be surprised if states tax the benefit. In case a politician reads this, increasing taxes has a negative economic impact.
In the short term, there will be praise, increased output to replace inventories, claims that we’re less dependent on foreign oil, claims that the environment is better off, and a disregard for how much it costs and how much the economy will decline six months after the program is over.
Maybe I’m too skeptical, but have YOU ever heard the government criticize a program?
Here are some other posts on the Cash for Clunkers program:
- Cash for Clunkers Taxable?
- Cash for Clunker Payments and Tax Rules
- Cash for Clunkers Tax
- Cash for Clunkers Tax Rules
- Questions About The Cash for Clunkers Program Answered
- Get Money for Your Gas Guzzler
- Cash for Clunkers: Is It Even Worth It?
- Cash for Clunkers: Broke Already
- Cash For Clunkers Ending Monday – Toyota and Honda profit much more than Ford and GM
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{ 9 comments… read them below or add one }
I wholeheartedly agree with every position put forward in this post.
The federal government needs to stay out of our lives, not become more and more involved. The trouble is… they will continue to take more and more power until the day the citizens stand up and demand (and possibly have to *force*) a change.
In my opinion, the entire C.A.R.S program was a total failure. Strong language? Sure… but we need more unwavering opinion and rock-solid stance in this country… more now than ever!
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Something people seem to forget from this program. The little mom and pop used car places. There are a lot of these shops across the country that rely on the $4000 (give or take) cars. They take in some cars with high mileage, that need a little work. They do the work themselves and then resell them to make a small profit. The government just junked their inventory. What about the people that are shopping for the $4000 car. The governement just junked their supply. How is it going to affect these two groups of people?
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Ron 's reply:
August 29th, 2009
Very good points.
Will someone who can only afford a $3,000 pickup truck be able to find one?
Will the mom-and-pop car lot be able to survive?
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Cash for Clunkers was little more than “bread and circuses” from our politicians. With America’s love for the automobile, it was viewed as a great opportunity to divert our attention from the real problems that face our nation. But thankfully, it was so poorly conceived and implemented that many Americans have the ability to clearly see its folly. Still, the political spin doctors will continue to paint a rosy picture to make us think it was so successful and good for America.
Cash for Clunkers was a farce, but unfortunately, we Americans have very short memories.
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Ron 's reply:
August 30th, 2009
What people forget is that tax dollars are our own money. All we did was transfer tax monies from the general treasury to people driving “clunkers” in the name of “helping the economy.”
Transfer payments do not help the economy. They do not create wealth. They simply take from one person and give to another.
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Remember American-made foreign cars are still supporting American workers and jobs! Until domestic auto companies can improve the quality, reliability, fuel efficiency, and prices of their products to match those of foreign-based companies, it’s an open market and consumers will choose the best option for them.
Remember competition is what capitalism is all about. If that’s what we purport to believe in, then we can’t whine when we’re beaten at our own game.
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Ron 's reply:
August 30th, 2009
I remember. But for that matter, foreign made and assembled cars support dealership sales personnel, repair personnel, maintenance personnel, secretaries, tire manufacturers, parts manufacturers, etc, etc, etc.
What struck me as odd was that the Secretary of Transportation is now calling Honda and Toyota “American Made” just to gin up support for his C.A.R.S. program.
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Very good post, Ron, and the “claims that the environment is better off” is total BS. People that could already afford new, higher mpg vehicles took advantage of this program and had their older, lower mpg vehicles (many of which were still very road worthy) scrapped to fill landfills. The environment (and the taxpayer) has suffered as a result of this program. The C.A.R.S. program is a failure in my opinion. I’m glad to have read this post as I’m so sick and tired of reading and hearing how successful it has been in the major news outlets.
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The only beneficiaries of cash for clunkers were the state governments who got the sales tax $ and the insurance companies since new cars cost more to insure. The losers were auto repair shops, auto parts stores, used car dealers, car donation charities, taxpayers and the poor.
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This was another negligent spending spree program. They claim 58% increase in fuel economy. I want to know where that statistic comes from, because they are highly suspect. The new vehicles (temporary tags) I noticed around here were mostly SUV’s. If these were valid figures, why isn’t the calculation presented for public inspection?
If we consider that the vehicles traded in were 2/3rds consumed, one would have to divide that claimed fuel economy savings by 3 to arrive at a realistic figure. In other words, that savings was achieved only for the remaining one third life of the scrapped vehicles. If we further consider that the vehicles might have been replaced by even more efficient cars that are promised in two or three years, the fuel economy savings over the long term is nil. On top of that, there are large environmental costs for building a new vehicle that are not contemplated. The energy costs to produce the raw materials and manufacture the new cars is neglected.
This program spent $4000 per vehicle in order to remove useful productivity from society. It spent another $4000, the residual value of the used vehicles that were removed from circulation. So government effectively spent $8000 each of taxpayer money for a negligible improvement in fuel consumption.
The people who benefited are those who had spare cash and in a mood to spend. All that happened is they moved the purchase earlier a year. Those who are poor were damaged by the removal of affordable used cars from the supply.
We need to vote these spendthrifts out of office before they destroy what remains of America.
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I whole heartedly agree that saving the US jobs in foreign auto factories is a 2nd place win at best. But one gripe I have about people attacking foreign cars. Usually the people who do so are people who believe in Lessiz-faire Capitalism. What we’re seeing here is people moving in droves to buy foreign cars. Not a single one of them has a gun to their head. No one is forcing them. They’re buying the cars because auto makers like Toyota have been putting out a significantly better product than US auto makers. This is Lessiz-faire Capitalism at work. Nothing more, nothing less.
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Excuse me – Hondas made in USA – Indiana – Ohio etc. are fully manufactured in USA! The profits do not all go “overseas” – they go to stockholders! They (stockholders) can live anywhere on the globe!
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Ron 's reply:
December 24th, 2009
You’re excused and most of what you said is true, but corporate retained earnings are repatriated to the country where the automaker is based. In the case of Honda, that’s Japan.
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