A Success Or Failure In The Making?

[MJS]

What are your thoughts on the cash for clunker program that is being offered?
http://www.courant.com/news/breaking/sns-ap-us-cash-for-clunkers,0,3316387.story

WASHINGTON (AP) — Facing a White House deadline, Senate Democrats are struggling to win over enough reluctant Republicans to pass a $2 billion extension of a popular rebate program that gives consumers up to $4,500 to trade in their old gas guzzlers for more fuel-efficient vehicles.

Senate discussions are expected to continue Tuesday after the Obama administration and backers of the "cash for clunkers" program picked up support from three lawmakers who wanted the program limited to the purchase of even more fuel-efficient vehicles. Data released by the administration showed the new vehicles purchased under the program were 61 percent more fuel-efficient than the trade-ins.

Republican Sen. Lindsay Graham said Tuesday morning he thinks the Senate will approve it.

"I hope it comes out of the stimulus program and doesn't add to the debt," Graham said in an interview on NBC's "Today" show.

Bold part mine, and this is one of the things that concerns me. Seems that much of the problems that we have today, was caused by lenders giving houses, cars, cash, etc. to people who got in over their head and couldn't afford what they had, thus the downward spiral that we're in today. So, when these people with clunkers come to the local dealership to trade in for something else, I hope, really, really, really hope, that in their rush to make a sale, the dealers are making damn sure that the people they're selling to, can afford the payments on the newer vehicle.

Hey, if the program works, great. But as soon as the slightest problem comes to light, it needs to be addressed before we find ourselves in another hole, we struggle to get out.

 

[CoryKS]

Interesting analysis from Wretchard here: Cash for Clunkers. I'll be curious to see if this program does lead to a shortage or at least a rise in cost for used vehicles.

The fact that the clunker must be physically removed from the market proves it still has some economic value. Why should something which still retains a value, even in America, be destroyed? The Specialty Equipment Marketer’s Association posed this very question when it wrote President Obama opposing the program. It argued that destroying the vehicles would hurt small businesses and the car business; it would penalize people who couldn’t afford a new car in any case, cash voucher notwithstanding. “Vehicles are frequently recycled down the economic chain as they age. Scrappage programs will disrupt the supply of used cars, raising prices further on the very vehicles most often purchased by low-income citizens.”

 

[KELLYG]

From what I understand the vehicles are rendered inoperative and then crushed. Proof of their demise is required for the dealer to obtain funds. Some of these vehicles still have a lot of life left in them. I would personally feel better if these clunker cars were donated to a program like Good Will or Salvation Army etc, so that they can be used to help someone instead of being crushed. MJS is also correct in stating that some our current problems have come about due to people being too much in debt. Is enticing people to go further into debt what we really need?

 

[Nolerama]

I wonder if that will affect the car repair industry in an adverse manner.

However, I do like the concept because it's getting people out buying cars. In this economic climate, an spike in demand for new vehicles is good (temporarily) for a number of industries.

The financing part is what troubles me. This is a sensational program and markets to peoples' emotions and beliefs rather than the bottom line in their checkbooks. I assume, like the housing industry, people will be biting off a little more than they can chew financially; even with the $4500 credit.

I'd hate to see that bottom out.

 

[FearlessFreep]

I tend to trust Murphy's Law and the Law Of Unintended Consequences on thins like this so I tend to think it will be realistically a failure

1) Enviro impact of making the new cars
2) Enviro impact of disposal of old cars
3) Financial Impact of a lot of people getting more credit to take on new car payments they otherwise didn't have

(1 and 2 are there already but they've been artificially accelerated)

 

[MJS]

Does anyone know exactly how the program works? I've heard that you're limited as to what you can buy once you trade in the clunker. Again, this is 2nd hand stuff that I've heard, so I'm not sure how accurate this is. I mean, do they have certain cars that you have to pick from, or could you go and buy a 30 or 40 thousand dollar vehicle? If that was the case, then yes, I can just see the system failing. If people couldn't afford a $40,000 vehicle before, they sure as hell aren't going to be able to do it now.

 

[Big Don]

The ubiquitous logo of the THREE R's that the environmental crowd has pushed for some time now just doesn't apply anymore does it? REDUCE! REUSE! RECYCLE! $4500 goes in to $1BILLION 222,222 times, taking 222,222 massively polluting cars off the road sounds like a great idea, except, that isn't what is happening. Perfectly running cars are being destroyed, for no good reason.

 

[seasoned]

From what I understand the vehicles are rendered inoperative and then crushed. Proof of their demise is required for the dealer to obtain funds. Some of these vehicles still have a lot of life left in them. I would personally feel better if these clunker cars were donated to a program like Good Will or Salvation Army etc, so that they can be used to help someone instead of being crushed. MJS is also correct in stating that some our current problems have come about due to people being too much in debt. Is enticing people to go further into debt what we really need?

Giving someone $4,500 for their old car to get that polluter and gas guzzler off the road, and in turn sell them a new one more friendly to the environment, is the intent. Now if they turn around and put that same polluting gas guzzler back on the road, what have they gained??

 

[CoryKS]

Giving someone $4,500 for their old car to get that polluter and gas guzzler off the road, and in turn sell them a new one more friendly to the environment, is the intent. Now if they turn around and put that same polluting gas guzzler back on the road, what have they gained??

Depends on whether the total environmental impact of building a new car and destroying/disposing of the old car is higher or lower than the environmental impact of driving the old car. But I'm sure they've done extensive analyses of the relative costs in their rush to pass this bill.

 

[KELLYG]

Not all of the cars that are being traded are gas guzzling emissions spewing vehicles. Most newer vehicles especially in NC have to pass and emissions inspection the registers the type of emissions a vehicle is emitting into the environment if it does not pass then it has to be brought into proper working condition. Further reading states that the car can not exceed 21 years in age. So they are getting some cars off the road that are indeed clunkers but not all are. From what I understand, they have to be in proper operating order at least 1 year or more before they are traded They just have to get less combined ratings of 18 mpg and a trade in value of less than $4,500. The car can not exceed 21 years in age. So they are getting some cars off the road that are indeed clunkers but not all are.

Cash For Clunkers Overview PER CASH FOR CLUNKERS FACTS .COM
Summary of Car Allowance Rebate System - Cash for Clunkers Voucher Qualifications Min. Fuel Economy for New Vehicle$3,500 Voucher$4,500 VoucherPassenger Car22 mpg *Mileage improvement of at least 4 mpgMileage improvement of at least 10 mpgLight-Duty Truck **18 mpg *Mileage improvement of at least 2 mpgMileage improvement of at least 5 mpgLarge Light-Duty Trucks ***15 mpg *Mileage improvement of at least 1 mpg or trade-in of a work truckMileage improvement of at least 2 mpgCommercial trucks ****
Trade-in must be at least pre-2002

 

[seasoned]

From what I understand the vehicles are rendered inoperative and then crushed. Proof of their demise is required for the dealer to obtain funds. Some of these vehicles still have a lot of life left in them. I would personally feel better if these clunker cars were donated to a program like Good Will or Salvation Army etc, so that they can be used to help someone instead of being crushed. MJS is also correct in stating that some our current problems have come about due to people being too much in debt. Is enticing people to go further into debt what we really need?

Giving someone $4,500 for their old car to get that polluter and gas guzzler off the road, and in turn sell them a new one more friendly to the environment, is the intent. Now if they turn around and put that same polluting gas guzzler back on the road, what have they gained??

Depends on whether the total environmental impact of building a new car and destroying/disposing of the old car is higher or lower than the environmental impact of driving the old car. But I'm sure they've done extensive analyses of the relative costs in their rush to pass this bill.

The fact is they are already doing it. You got the old car, they, the government, has the money. Or they had the money. Now Kellyg is saying don't distroy the old car, but put it back on the road??? Am I missing something here, or is the whole program a big money give-a-way. $4,500 dollars = one distroyed car = less pollution. So says the government, but put the old car back on the road, no, just give people $4,500 dollars and let they keep their old car. Is this what I am missing????

 

[KELLYG]

Seasoned,

They are indeed rendering the vehicles inoperative. I was just thinking that instead of being destroyed that they could be used. Maybe some one that needs a car to go to work to support themselves could use it to improve there circumstances.

The required mpg increase for the $3500 rebate is 4 mpg
The required mpg increase for the $4500 rebate is 10mpg

The required miles per gallon increase or the difference in mpg in the old car vs the new car is not that significant. It is increased yes from 18 to 22 mpg at lower scale to 28 mpg upper scale.

 

[CoryKS]

The fact is they are already doing it. You got the old car, they, the government, has the money. Or they had the money. Now Kellyg is saying don't distroy the old car, but put it back on the road??? Am I missing something here, or is the whole program a big money give-a-way. $4,500 dollars = one distroyed car = less pollution. So says the government, but put the old car back on the road, no, just give people $4,500 dollars and let they keep their old car. Is this what I am missing????

Forget the program for a second. Often when a person buys a new car, they trade in the old car and it goes back into the market as a used vehicle. It sells at a lower cost and is a more attractive deal for those who cannot afford to purchase a new car. If it cannot be sold as used, it can be scrapped for parts or metal.

The cash for clunkers program stipulates that all cars traded in for the rebate must be destroyed because they don't meet certain efficiency standards. These cars will therefore not be available on the used market, so there will be fewer used cars available to lower-income buyers, and those that are available may sell at a higher price.

Those who would normally buy the used cars will have three choices: buy a used car if available and they can afford it; buy new if they can afford it; or maintain their existing car if they have one. We are excluding public transportation for the moment to stick to the automotive circle of life.

Those who can buy a used car will do so, possibly at a higher cost. This program is about environmental costs, and so these people are not really the focus or the concern of this program, so we'll leave them be. The program does not affect them.

Those who buy new because a suitable used car is not available or offers neglible savings now add the environmental cost of building a new car, where they would have otherwise recycled an existing car. So the question here is whether the environmental savings of the new more efficient car, minus the environmental cost of building it and destroying the old car, is greater than the cost of driving the less efficient used car?

Then there's the third group, those who can afford neither a new or used car, and choose to maintain their existing, presumably older and even less efficient vehicle. This group might have traded their crap vehicle in for a used vehicle which, though not as environmentally wonderful as a new vehicle, is more fuel efficient relative to the one they own. That option is no longer available to them, so they continue to drive and maintain their aging vehicle. Has that cost been factored in when determining the environmental benefits of this program?

What Kelly was saying is that you have a vehicle that is being destroyed even though it still has some value, and that they could be donated in order to help those on the lower end of the income scale. You asked what they would have gained, given that this program is designed to address environmental concerns. Well, you would still have an increase in the number of new fuel-efficient cars on the road. You might also have benefits when those who buy the used cars trade in their relatively worse cars. Again, it goes back to whether the scenarios I've described above were factored in when the program was developed.

 

[punisher73]

I went to a dealer this past weekend to look at their selection, it looked like they had moved their inventory off the lot to somewhere else it was pretty bare. The dealer said that they were not participating in the program anymore because they had about $250,000 tied up of their money while waiting the govt money and they couldn't afford to keep shelling out the credit.

They had about 5 vehicles that hadn't been turned in yet. Only about 2 of them were "clunkers" the other ones were VERY nice SUV's and trucks that had been well taken care of and would have made a nice care for someone who could not afford it or did not want to spend alot of money on a new car.

In the long run I think that it will do more harm than good. I think you will get alot more people incurring more debt just to buy a new car when their old car worked fine.

 

[Satt]

Maybe they want us to get into more debt. The value of the dollar crashing could = more power for government. What am I saying!? Nevermind. The government would never plot against its own people for more power and control.

 

[still learning]

Hello, It seems to be making a difference right now....
As far as for mechanic's....sure less business...

for insurance companies and repair shops ...a boom!

For the person with this NEW CARS....happiness / till monthly bill arrives...

Aloha,

PS: Should go to other industries too.....REFRIG's, washing machines, dryers, TV"S? computers/laptops....toilets seats (we know what new and clean means here (healthness)..

Any other suggestions???

 

[Deaf Smith]

I have these problems with the clunker program.

a) Alot (but not all) of the people trading in cars are poor and short of cash. They are now in debt for maybe 10 to 15 THOUSAND dollars they would not be. If they lose their jobs, then they default on the payments, and the banks then have a used car and no money! Last time banks had a lot of worthless loans they had, well, what they have now.

b) The 'green' thing is a sham. Those that buy the new cars will simply drive more than they did before! Thus use the same amount of gas but simply drive around and not be frugal as for when and where they go.

c) Looks like the top cars sold are foreign! So much for helping the auto industry over here.

d) IT'S OUR MONEY AND NOT SOME FREE STUFF FOR CONGRESS TO GIVE AWAY.

Deaf

 

[Phoenix44]

I'd feel better about it if the cash had to be used for American made cars. Just my opinion.

 

[KELLYG]

A couple of points.
The dealership is loosing major profit. Normally the car's traded in are resold now they are being crushed instead. If you sell you entire inventory then you have nothing left to sell. If everyone that is on the fence about buying a car buys one now who are they to sell to in 3 to 6 months.

They are using a chemical substance inserting it into the engine and run it till it seizes. This causes the car to spew noxious chemicals in the air. Have you ever seen an engine blown up while watching a race. That is what it looks like to get one ready to crush.

I am not sure how the other fluids, coolant, transmission fluid, gas, are being handled. Are the cars that are crushed to leak fluids into our ground table affecting the water supply.

I also read that in our area they had to designate a landfill or create a new landfill to house these vehicle. This is going to cost the taxpayers more money.

This cars discount applies to domestic and foreign vehicle. So in essence we are subsidizing foreign interest and using our tax dollars to do it.