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My Opinion on the Cash for Clunkers (CARS) Program

Now that Cash for Clunkers is over, consider donating your car. Also, information on whether Cash for Clunkers affects your taxes.

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.

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Cash For Clunkers Suspended - Now Deadline Extended - Why? | Debt Free Adventure!
August 3, 2009 at 10:16 am

{ 9 comments… read them below or add one }

Roger July 20, 2009 at 9:41 am

Sounds like you and I are on the same page on this. As an environmentalist, I like the idea of getting low mileage cars off the road and replacing them with higher mileage vehicles. I can even see encouraging people to buy new vehicles, for both financial and environmental reasons.

On the other hand… I am a bit miffed about the limit on used vehicles. And it would be nice if the program was structured to encourage the dealers, rather than the government to make the payments (for example, giving the dealers tax incentives to take ‘clunkers’ as trade-ins and remove them from the road). The whole situation with government take over of the banks and car companies makes me uneasy, but that’s a topic that could fill an entire blog (not a post, a whole separate blog) itself…

Roger’s last blog post: Super Saver Sunday – Cartoon 2

Kandace July 20, 2009 at 9:58 am

My concern is that the cars that are traded in will be scrapped and not available for resale. To me this is a huge waste and while more cars with higher mpg are on the roads through the program, more stuff is in the landfill.

Unless one has the means to buy a new car with cash, I think this program just compounds the problems that can be solved in other ways.

Kandace’s last blog post: Chasing Apricots

Brian July 20, 2009 at 12:33 pm

Haha. I absolutely loved this:

“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.”

At least its a better stimulus to buy new cars beyond the sales tax becoming a write-off in 2009.

Brian’s last blog post: Save Money on Your iPhone Bill

Dad July 21, 2009 at 12:43 am

The program looks confused. In fact it looks typically like the kind of thing the government designs. There no party or lib/cons relationship. Government programs are usually confused. I agree with you that allowing the new car to be used makes a lot of sense and will allow more people to participate without breaking their bank account. Use of a standard table for mpg is probably unavoidable since such a value is not easily measured. I was very surprised at how low the increased efficiency required by the program was.

I checked the mpg tables in the article you point to. I was really shocked. Cars that are comparable to my 2001 Buick are getting significantly poorer gas mileage in the 2008 models. In fact all the GM. Ford and Chrysler models I checked (the smaller ones) were incredibly poorer in 2008 than 2001. I was truly taken aback when I found that the Saturn Aura Hybrid averaged only 27 MPG with Highway of 32 and city 24. Honda, Nissan, and Toyota did better. The Nissan Altima one only 1 mpg worse than the Saturn hybrid and it is not a hybrid.

While I looked at the hybrids I did a lot of comparing of the non-hybrids because I suspect that the price tag on the hybrids are still to high for most people.

Comparing various cars using the data on the mpg page which inlcudes other significant information, I saw the I would probably favor the Nissan Versa and Sentra for passenger space and luggage space. I looked that the 2008 numbers.

In summary I doubt that this program would be of much use to most people I know.

Dad July 21, 2009 at 12:49 am

In the investigation I did for my previous comment something occurred to me that might be worth looking into. I considered three factors in comparing cars: mpg, passenger space, and luggage space. Being older the passenger space is important since I don’t fold and unfold as well as I used to.

What I’m wondering is what the cost / benefit ratio of having a car with less luggage space but better milage and pollution factors for most of the year and renting a more suitable car for traveling long distance with a number of suitcases on vacation? Does this make sense. I know that urban dwellers who could afford to buy a car don’t and rent when they need one. I haven’t thought this through yet but I think I should as it could make a big difference in my future choices.

Of course, using mass transit where it works for the long travel and renting a car for use at the destination is another possible option.

CindyS July 22, 2009 at 1:45 pm

Since my car is a Geo Metro and gets 43 mpg, it won’t qualify as a clunker. I couldn’t afford to buy a new car even with $4500 off so I’m going to sit in the other corner and cry with Mrs. M. 🙂

plonkee July 24, 2009 at 8:01 am

Nationalisation doesn’t bother me. (Caveat: I am British.) Government schemes in general often tend to not work out as well as hoped, because politicians have short term aspirations that are independent of doing a good job.

Reducing pollution is a good thing. I think we have more/better incentives over here to do so, because we drive more fuel efficient cars. You should consider increasing the cost of petrol/gas to $6 a gallon.

Peter July 24, 2009 at 1:24 pm

I think the problem with this program is that it just tries too hard to be too many things to too many people. It’s a bit schizophrenic – it’s a program for environmentalists to help reduce emissions. It’s a program to help auto makers. It’s a program to help consumers.

In the end I don’t think it will end up helping any of these groups to the degree that they had hoped. oh well. *sigh.

AnnJo July 28, 2009 at 8:38 am

It offends both my frugal and my environmental instincts to throw away a usable car and build a new one, just for an improvement in MPGs.

There’s an enormous investment in energy involved in the manufacture, transport and sale of a car. Oil has to be drilled, shipped and processed for all the plastic components and for the transport from far corners of the globe of various metals, rubber, glass, etc. Metals have to be mined, smelted and made into steel. Fibers have to be grown and processed into fabrics and padding, etc., etc., etc. Factories have to be heated/cooled and lighted for the manufacture of all the components and their assembly.

I seriously doubt that it does the environment any NET good to scrap that huge investment of resources before its been used to the fullest.

And as for helping the economy, that $4,500 first had to be taken away from taxpayers like me, who would have spent it on goods and services we considered of greater value than a new car. It helps one segment of the economy – carmakers and sales – at the expense of a bunch of other segments. No net gain there either.

But if it gets a liberal to question whether it is possible for government to overreach, then maybe it’s not a total waste!

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