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