Last Friday I wrote about the specifics of the Car Allowance and Rebate System (Cash for Clunkers) program. There was a lot of information to fit into that post (so if you’re looking for the specifics of the program, try that one) and I didn’t have room for my own opinion.
My opinion on the program is torn. On the one hand, I can see its various advantages. Even before it was chic, I’ve always been a believer in the importance of getting a good mpg. Perhaps that’s because my mother always computed it when I was a kid. I think it’s better for the customer and the world–a win-win.
That part of me sees this as a good thing, as encouraging people to buy something with halfway decent mpg. It’s even a good PF decision if you buy a car like a Civic, which has an excellent mpg and will last for a long time.
Also, it’s making buying a new car a better deal. The biggest reason not to buy cars new is that they’ll depreciate in value as soon as you drive them off the lot. If you’ve got the $4,500 rebate (for 10mpg or more improvement), then you’re a little less likely to go underwater on your purchase. Combine that with some previous savings and the value of your trade-in and you might not be underwater at all.
Buying new doesn’t give you a huge advantage, but it gives you a little longer to drive that car into the ground, right?
On the other hand, I see many things which make me less than enthusiastic about CARS.
First, there’s the problem of having to buy a new car. I mean, the program wouldn’t be there if the government weren’t trying to stimulate the economy. So it makes sense that they want the new cars to move. And, as I said above, getting money off the cost makes it less of a bad financial decision.
Yet as someone who espouses getting the best value, I can’t feel comfortable about buying new cars when one can get a used car at a much better value. I worry that some people will buy new cars when they simply can’t afford it. Even if it’s not as good for the environment, driving a gas guzzling beater may still be better for your wallet.
Second, there’s the government. It makes sense for me when the government gives incentives for people to do certain things. We wouldn’t have tax-deferred retirement acccounts like IRAs and 401(k)s if the government wasn’t willing to forego income taxes either before or after we put the money away for retirement. This retirement incentive is supposed to help people save more and be less of a burden on society after they retire.
There are other incentives which sit pretty well with me. This one just doesn’t. It seems to me like the sort of thing that car companies should be doing themselves.
Then I remember that the government kinda owns the car companies and I go sit and cry in the corner. There are some things that make even a liberal think the government is overreaching.