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Cash for Clunkers - Good or Bad Idea?

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Comments

  • steverstever Posts: 52,683
    do you think there would be many qualifying buyers w/vehicles. Would there be much demand?

    Yes, and yes.

    I still have an eligible vehicle for example.

    2009 Vehicle Sales in Europe Remarkably Stable (thinks to their Cash for Clunkers). (Inside Line)

    It doesn't seem to have helped Fiat all that much (or maybe it did and they would have really been in the tank):

    Govt calls Fiat temporary plant shutdown 'inopportune' as it moves on scrapping incentives (Canadian Press)
  • kathyc2kathyc2 Posts: 159
    I think the real question should be how many people with qualifying vehicles are waiting to see if C4C is brought back before they make a move.

    How much is that hurting current sales? Did the short term "fix" create long term problems?
  • kernickkernick Posts: 4,072
    They really don't understand what's wrong with the economy, and how to fix it. $700B loaned out with little to no positive effect, and at a loss of about $150B! :mad:

    http://money.cnn.com/2010/01/31/news/companies/tarp_report/index.htm?hpt=Sbin

    I saw this auto-related quote on another site: "Stated another way, even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," said the report.

    You could insert C4C in there instead of TARP, as it was nothing more than an artificial boost from the natural supply-demand of the current economic equilibrium.

    Heck if they give me $1B to loan out, I promise them a better return of 0.9B! :D

    Stephen987 - but you're learning so much else about the incompetents and crooks in our government, from my links.
  • srs_49srs_49 Posts: 1,394
    They really don't understand what's wrong with the economy, and how to fix it. $700B loaned out with little to no positive effect, and at a loss of about $150B!

    You're right, they don't! Like I've said before, a lot of those jobs that went away are just never going to come back. People that held those jobs are SOL, no matter how much the economy picks up.

    I mean, how many administrative assistants/office managers do we need? To do what, order pencils and papers?

    Here's another example. I was watching the news the other morning, and on comes one of those how-to-get-your-life-in-order segments. The special guest gave herself the title of (no, I'm not making this up) "Gardening Expert and Life Style Coach". I mean, come on now :P :shades: . No amount of government spending is going to make me hire a "...Life Style Coach".
  • mikefm58mikefm58 Posts: 2,882
    Life Style Coach

    Jay Leno did a joke on what a Life Style Coach is, he called them friends.
  • andres3andres3 Southern CAPosts: 9,211
    ...doesn't make them accurate or true. You may wish to live in a negative world but others do not. Being in a minority you'll just have to learn to deal with it.

    Actually the polls I saw showed a majority of Americans were against C4C and for good reasons.
    Toy '16 Audi TTS quattro AWD, Commuter '16 Kia Optima LX 1.6 Turbo FWD, Wife's '17 VW Golf All-Track SE 4-Motion AWD
  • steverstever Posts: 52,683
    I think the real question should be how many people with qualifying vehicles are waiting to see if C4C is brought back before they make a move.

    Whoa, that's a great question. Unintended consequences beyond simply pulling sales forward perhaps?
  • vinnynyvinnyny Posts: 774
    Why would anybody be silly enough to wait for another C4C program? Consumers didn't profit from C4C. Check your records and see what happened to the rebates for C4C eligible cars--they dropped like a rock! Transaction prices for those cars were higher during C4C than in the months immediately preceding the program and are lower today (now that inventories are increasing as the 2010s arrive). One example: Ford Focus was selling at MSRP in some areas. When has that ever happened?

    If you want a good deal on a 2009 model, buy it now and trade that clunker for the $500 it's really worth...
  • steverstever Posts: 52,683
    Well, I was eligible last time around but didn't bite. We're due for a new car, but we don't have any real urge to go buy one (we're silly that way :) ). So a new Cash for Clunkers program could sway us.

    And I want a 2010 or newer - I'm done with the aughts.
  • plektoplekto Posts: 3,738
    The problem with C4C was that it wasn't a simple "buy a vehicle that gets 5mpg or 10mpg higher than the one you are turning in" It had cumbersome rules, stupidity at every turn(like how a SUV could only be towards another SUV - and even 1mpg better was enough to qualify), and was a total nightmare to implement.
  • "Consumers didn't profit from C4C. "

    but the union did, and end of the day that's watter matters in Washington.
  • hpmctorquehpmctorque Posts: 4,600
    You spoke for our household too, since we're also due for a new car, but don't have any real urge to buy one.
  • I bought a 2009 Mazda 5 when the CFC first started. When the program kicked in Mazda added a $500 CFC rebate. I also got a $1750 rebate. I got a car that listed fo $22,000 and change for $17,900. I benefitted from CFC but I agree not everyone did.
  • lemkolemko Philadelphia, PAPosts: 15,294
    Heck, that reminds me of a program the Ford Administration had in the mid-1970s. One of the programs was to teach people how to be elevator operators when Otis Manufacturing hadn't built a manually-operated elevator since 1963.
  • gagricegagrice San DiegoPosts: 31,112
    I remember the made in USA computers that were $10,000. No thanks to US made computers. You cannot pay someone $25 per hour with benefits to do menial production and survive. There will be a gray market to supply the cheaper goods.

    It is only a matter of time before we get Buicks made in China. I would imagine most of the electronics are already coming from China or India.

    Speaking of C4Cs. I would consider trading my Lexus or Ranger if they decide to give away $4500 in trade. Some did make out in that last one. If you let the dealer pull the wool over your eyes you probably got screwed. Happens every day with or without a clunker program. Golden rule start at invoice and work downward. Then when the deal is to your satisfaction deduct the $4500 C4C vehicle. If you are really tight you can go for the scrap rebate of a couple hundred bucks. Get on board early before the selection is gone. On buying or selling anything. We play by my rules or we don't play. There are ALWAYS dealers that are hungry somewhere in the USA.
  • steverstever Posts: 52,683
    Get on board early before the selection is gone

    I think that was key last time. The buyers who jumped tended to get better deals. The dealers who jumped moved more metal.

    (and yeah, some "Chinese" posts are missing).
  • steverstever Posts: 52,683
    "In fact, it had the opposite effect than what was intended."

    Surprise!!! Cash for Clunkers Didn't Work, Say Economists (minyanville.com)

    I suspect it wouldn't be too hard to find some economists who would say it was a smashing success.
  • ateixeiraateixeira Posts: 72,587
    Here's our controversial statement, now give us $5 and you can read about it.

    Dunno, sounds like a teaser to make $$$.
  • stephen987stephen987 Posts: 1,994
    edited October 2010
    Thanks to C4C, I bought about two to three years sooner than I otherwise would have. But it meant taking on a second car payment--and therefore I didn't feel like I could spend as much.

    If I had waited those extra two to three years, not only would I have bought a bigger and more expensive car, but it would probably have been a Ford or Chevy or Buick rather than a Japan-built Honda Fit.

    I doubt this was the intended outcome.
  • berriberri Posts: 7,749
    C4C was a bone for car dealers. Unfortunately for buyers, the used car market pricing is still hosed up from it. But now the government has moved on to building up more Amtrak routes so they can run more empty trains, consume more fuel and tie the government into ongoing wasted expenses into the future. Spend a bunch on more train cars and new track today and then keep spending on operating the money losing routes down the road.
  • fushigifushigi Chicago suburbsPosts: 1,381
    I don't think a significant portion of the used car market's higher prices is due to C4C. I think it's more likely due to the reduced new car sales. Here's my reasoning: When new cars are bought, some percent of the time they're bought as a replacement vehicle which means that the new car purchase also produces a used car to sell (dealer trade, private party sale, or some other transfer of ownership). I'm going to toss out a number and say 70% of new car sales create a used car. If the number isn't 70%, it's probably not too far off one way or another.

    When the new car buy rate was 16 million a year, 70% of 16MM or 11.2MM used cars enter the market. But when new car sales fell to under 11MM units due to the bad economy, the used car supply was correspondingly reduced to under 7.7MM units.

    C4C took around 700K cars off the market so less than 10% of a single year's supply. And it was a 1-time hit. The tanking of used car supply due to ongoing poor new car sales is a far, far larger contributor.

    This is just my opinion, but to me it makes more sense than C4C having such far reaching effects.
    2017 Infiniti QX60 (me), 2012 Hyundai Elantra (wife)
  • hpmctorquehpmctorque Posts: 4,600
    I think you're correct. although I have no hard evidence to support this notion. The C4C program probably had an uneven effect across market segments, taking a disproportionate number of older SUVs and expensive-to-repair luxury cars off the road than, say, mass market compacts.
  • I was tempted by the C4C program but the dealers were not budging at all during those months. I would have had to trade in our old mini-van and to get a midsize sedan we needed then turn around and replace the mini-van as well. Turns out I got the sedan we wanted @ $5,000 off MSRP (dealers wanted FULL MSRP during C4C) and we still have the old mini-van still running fine. Glad I didn't bite. Can't say for sure what is jacking up used car prices but just looking for a junker for friends, we hear used car salesman talking about C4C as one of the reasons. Obviously that is just their version and may be a smokescreen anyway.
  • Not if you would have been there at the very beginning...BEFORE the dealers knew what was about to hit 'em! There was a small window there for those who acted right away. Glad that it all worked out for you regardless of the CFC hoopla but don't kid yourself, some of us made a killing ($50 old beater trades that overnight turned into $4500 in addition to the rebates and deals that were going on at the time for select models/manufacturers on new cars). :shades:
  • fushigifushigi Chicago suburbsPosts: 1,381
    I don't see how C4C impacts your ability to afford a vehicle. It was a one-time program that removed around 700K cars from the market. There are approximately 250 million vehicles in the US so at best C4C shrank the car market by not even 0.3%.

    The struggling economy was and continues to be a far larger problem for car sales. When the economy tanked, new car sales dropped from around 16.5 million cars/year to around 10.5 million. It still hasn't recovered though sales are slowly climbing. And for almost every new car that isn't sold, a used car doesn't enter the market so the used car market shrank as well.

    A smaller used car market leads to higher used car prices. Supply & demand is at work. I'd say there's also a number of people who are simply holding on to their cars for longer because cars are made better.

    The problem is made worse by the tightened credit market. People who have good, even excellent, credit ratings are having problems getting approved for car loans as things like debt-to-income ratios are being weighted more heavily. The banks are not willing to assume as much risk as they were a few years back. And frankly, that's a good thing as it helps to keep some consumers from making poor financial decisions by buying cars they can't truly afford (ditto the housing market).

    As far as C4C adding to the deficit, that's complicated. For instance, reducing the emissions from the clunkers has health benefits. Those benefits might not manifest in obvious ways but in general there are fewer carcinogens in the air. That may lead to reduced health problems later in life which can lead to lower medicare costs thereby saving government & consumer money. This is unfortunately near impossible to measure.

    Likewise, C4C helped keep some auto plants open. Open plants = employed workers = income tax revenue + trickle down income from employee spending. So some C4C costs were quickly recovered simply by having autoworkers stay employed. Along those lines, auto dealers were able to stay in business as were supporting industries and even places like restaurants & small shops benefit from employed people who can continue to afford to eat out & buy goods.

    Finally, reducing gas usage positively impacts our trade deficit.

    Honestly, other subsidy programs pay billions of dollars every year to companies and no one makes a fuss over it. http://www.ers.usda.gov/briefing/farmincome/govtpaybyfarmtype.htm shows the government has been paying $12-24 billion every single year in farm subsidies with the majority going to commercial, not family, farms. That's far more of a problem for the deficit than a single, brief $3-4 billion program.
    2017 Infiniti QX60 (me), 2012 Hyundai Elantra (wife)
  • hpmctorquehpmctorque Posts: 4,600
    "... C4C shrank the car market by not even 0.3%."

    That may be true, but the more relevant ratio is the usable cars removed from service versus the number of cars for sale. That number would be some multiple of 0.3%. Also, the reduction of supply hurt the low income people the most. The fact that there are worse programs than C4C is a weak argument in support of C4C.
  • fushigifushigi Chicago suburbsPosts: 1,381
    OK, I've heard that as many as 50 million cars are sold each year. Sorry, I don't have a link to back that up so if you can find a better number with a source, let me know. 50MM makes sense, though, as it would include the 10-12 million new cars + 40 or so million used, which sounds reasonable given the 250 million pool of vehicles and that some vehicles will be sold more often than once a year.

    700K out of 50 million is almost 1.5%. Bigger but still a far smaller percent of the market than, for instance, we've seen new car sales drop by. If I'm misremembering and the annual sales rate is closer to 40MM then C4C was still under 2% of one year's annual sales.

    I don't buy the argument that removing clunkers hurt low income people. Clunkers may have been cheap to buy but they are more expensive to operate. By the program's definition they get relatively poor fuel economy so annual fuel costs will be higher. Also, clunkers in general are older cars which are more prone to breakdowns and potentially costly repairs. IMO the cheap up front cost is balanced or outweighed by the higher operating costs.

    Owning a vehicle is a TCO issue, not a purchase price issue. You may look at removing a $1500 car from the market as depriving a low income person a vehicle they can afford, but I'd argue that what they can afford to buy isn't necessarily something they can afford to keep on the road. Or, even, keep _safely_ on the road.

    As for the subsidy issue, it depends on where your priorities are I suppose. I'm against giving out my tax dollars to companies with no expectation of a return on the expense. Food prices are not lower or more stable due to farm subsidies.

    When looking at the budget I would tend to target repeated expenses v. one-time costs. C4C = one-time; farm, foreign aid, & most other subsidies are repeating and cost us billions and billions every single year. In terms of "more evil" or "less evil" C4C is way less evil than many things our government does and I would prefer to concentrate on the more evil things first.

    And C4C was not a corporate handout. It was directed at consumers to encourage them to buy, much like we get a mortgage interest deduction to encourage people to buy homes. Another example would be tax credits for doing energy star upgrades to the home.

    Anyway, this isn't an argument in favor of C4C, I'm just saying that C4C's impact on the automotive industry & government deficit weren't really all that significant. There are far worse ways that government funds are being used and I'd rather those be addressed. Sadly, few in Washington on either side of the aisle seem to care about much beyond the next election cycle.
    2017 Infiniti QX60 (me), 2012 Hyundai Elantra (wife)
  • andre1969andre1969 Posts: 23,040
    Owning a vehicle is a TCO issue, not a purchase price issue. You may look at removing a $1500 car from the market as depriving a low income person a vehicle they can afford, but I'd argue that what they can afford to buy isn't necessarily something they can afford to keep on the road. Or, even, keep _safely_ on the road.

    True, but to a low-income person who can't qualify for a car loan, or save up a big down payment for a newer, more reliable, fuel efficient car, TCO is irrelevant. They're going to buy whatever they can afford, sink money into it when it breaks, pay the higher fuel bill, and if any repair becomes too cost-prohibitive, junk the car and then repeat the process all over again. In the long run they'll probably pay more for a succession of clunkers than if they had bought one reliable, efficient car to begin with, but unfortunately, that's how the "system" works, and it's unfairly stacked against poor people.

    In a similar note, there's a trashy motel along US Route 3 in Maryland, not too far from where I live. Total dive. You can rent a room there for around $750 per month. You could also rent a much nicer room in a private residence for a lot less than that, and even some small apartments wouldn't cost much more. But the sad fact is that if you're poor, you're not going to qualify to live in that apartment, unless you somehow get on Section 8. And nobody's going to rent you a room in their private home if you seem questionable. But at the ol' roach motel, if you can scrape together $750 each month, it gets a roof over your head. Another case of the poor ultimately paying more, for a commodity of lesser value.
  • ateixeiraateixeira Posts: 72,587
    Wow, this thread was dormant for, what, 2 years? Now it's active suddenly?

    Who wants a C4C v2.0? :D
  • andre1969andre1969 Posts: 23,040
    Who wants a C4C v2.0?

    Considering how badly my '85 Silverado has deteriorated in the past couple years, I'd be tempted! :sick:
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