Did you recently take on (or consider) a loan of 84 months or longer on a car purchase?
A reporter would like to speak with you about your experience; please reach out to PR@Edmunds.com by 7/25 for details.
A reporter would like to speak with you about your experience; please reach out to PR@Edmunds.com by 7/25 for details.
Options
Comments
First of all you have neither your logic nor your wording correct. The 'car companies' did nothing during C4C. I'll repeat what I noted before. The car companies built cars in the 1st 6 months of the year, shipped them to the dealers from Jan to Jun and then invoiced the dealers at the time the vehicles were shipped. The vehicles that were on the lots when the C4C buyers showed up had already been invoiced and paid for before the buyers arrived.
Faux News would lead you to believe that 'the car companies' were the beneficiaries of direct subsidies from the US Treasury. This is simply false and if you believe it then you live in a fantasy world where everyone is taking advantage of you.
What berri did correctly refer to was that buyers often did pay higher prices to 'the auto dealers' ( not the car companies, the car companies already had their money before the buyers arrived ). That was mainly due to the fact that supply began to run out during the end of the program and the buyers still wished to buy. That was their choice.
However nobody from either 'the car companies' nor 'the auto dealers' went off into the night and dragged poor Mr and Mrs America down to the showroom in their pajamas and nightgowns, held a gun to their heads and said "BUY". If you believe this then that's another manifestation of living in a fantasy of unproven fears.
Facts are the only arbitors. So far no one except Edmunds in its flawed article has attempted to bring out any facts to dispute that C4C did exactly what it was planned to do....and that it was a phenomenal success in doing that.
All the the complainers are simply exhibiting hand-wringing sobs and fears of some unknown boogeyman. That's also called being paralyzed by fear. Bring facts to discuss, facts are your friend. Otherwise continue to hide under the covers.
Oh really? Well my fearful interlocutor where did that money go then? Was it set on fire? Was it buried in the back yards of UAW members all across Michigan? Did it end up paying some Wall Street banker his bonus?
You've got lots of fears but no facts to back them up. Where did the money go? Here I'll help you.
690,000 vehicles in the program
Typical selling price ~$20000 per vehicle
Typical rebate to the buyer $4000
Typical state sales tax rate 5%
Typical Fed/State Marginal tax rate 25%
Typical Fed/State Business tax rate 30-40%
So where did the money go? It's pretty obvious if you understand the business and a little bit of accounting.
Facts...keep it to facts, not fears. Facts are your friends.
The car companies and their sales units benefitted. The money the dealers made selling the car for which they had already paid went into their pockets and to order replacement cars from the CAR COMPANIES (unless they bought them from CNN and ABC Nightly News which apparently are the only correct news reporting agencies? grin? :P _)
It's nice we have someone to try to catch us on each detail of our posts. Were it that I weren't so lowly ignorant . If BO isn't around to help straighten things out, it's good to have someone. :P
2014 Malibu 2LT, 2015 Cruze 2LT,
You are fond of saying the car companies didn't get any of the CFC money. When your Chevy dealer ordered up some cars to fill the empty space on your lot and you paid for them, who did you pay the money to? And, where did you get the money? (see post #3965)
This program was a sop to the unions at the car companies, in your case GM.
All of the paragraphs you have pounded out in defense of CFC were pure sophistry.
Happy you made a few extra bucks. Write more after the Oct, Nov. and Dec. sales numbers come out. Must admit, though, it's been a hoot,
Regards, DQ
YES, the crazy millions pumped into the scheme gives you a short lived boost. Talk to me in 10 years when the up front crazy millions are added to the back end loaded crazy millions required to manage/process/pay interest for this brilliant government run plan.
A riddle for yas, what's the process called when one goes from full blow capitalism to socialism........"DENIALISM".
I've said enough, I need to continue searching for me first home which will bring me $8000 in tax breaks next year.
That depends on how you count the cars. The feds did it differently than Edmunds did. More people bought a Focus than any other sedan for example.
I really don't get your argument. Using Edmunds' numbers, 4 of the top 10 cars sold were from domestic manufacturers. 3 of those 4 were already among the top ten sellers and the other made a leap of 2 spots to make the cut. The other 2 vehicles actually moved down the list. All 10 top C4C trade-ins were domestic vehicles. How was this a win for US manufacturers?i>
Typical Fed/State Business tax rate 30-40%
Let's examine these two facts you are so proud of. How many car agencies will show a profit and pay those taxes this year? It is not based on a good month of government stimulated sales. So if the average store sold 100 cars in the clunker program of which they received $400,000. Would you like us to believe the paid about half that in taxes? I did not think so. In this economic climate I would guess that maybe 5% of that $3 billion ever gets back to the states. You keep leaving out important facts. Like subtracting the sales that would have been made without wasting tax dollars.
By your own admission you saw many savvy buyers that took advantage of the program. Like my cousin with his old POC van that was parked with reverse gone. He took advantage of the ignorance that this bailout provided. Figuring he was going to pay for it in the long haul one way or the other. People that think there is a free lunch like to gloss over the fact that someone paid for that lunch.
690,000 vehicles in the program
Typical selling price ~$20000 per vehicle
Typical rebate to the buyer $4000
Typical state sales tax rate 5%
Typical Fed/State Marginal tax rate 25%
Typical Fed/State Business tax rate 30-40%
OK, I follow items 1,2, and 3. Sounds like you're saying that $1000 of the $4000 got returned to the STATES in the form of sales tax, right? The feds saw nothing of the $4000/clunker it laid out. So the fed (taxpayers) are still out $4000/clunker deal.
You've lost me on items 4 and 5. Since the $4000 rebate is not taxable income, how is that affected by the marginal tax rates?
If the dealers took out a loan (which seems to be the case) to purchase those vehicles from the manufacturer in the Jan-May time frame, then the selling price of the vehicles (minus some profit, of course) went towards paying off the loan the dealer used to get the vehicles in the first place. The business marginal tax rate you mentioned only applies to profits, not gross income.
If you want to know where the tax credits went breakdown a typical sale and follow the money. It's easy. None of it went to an 'auto company'.
But we were not the only ones benefitting. All the aftermarket employees benefitted by the extra business. All the banks benefitted from the extra business. All the managers and the owners benefittted from the extra business; c.f. Michael Jackson, CEO of AutoNation and his comments about C4C.
This extra income to the auto retailing side of the auto industry did not come free. Immediately Uncle Sam and the respective State taxing authorities were right there to get their part of this windfall. We never saw it. Right back to the US Treasury.
On the Sales Tax side. I view that as an indirect pass-through payment from the US Treasury to each of the states. Roughly $700 million was never seen by anyone. On paper the $4000 credit went to the buyer at the time of purchase; but those buyers never saw any of it; it all went to the dealers that held the inventory; but immediately within 4-5 days roughly $1000 was sent to the local state General Fund in the form of sales taxes. The transaction price was $21000 including vehicle and taxes.
The buyer only paid cash or borrowed $17000.
So what happened to the $4000? Follow the money. This is easy, if you know the process.
On a $20000 vehicle the dealer paid the vehicle maker about $17000 when it was shipped. Probably that dealer financed the purchase through his bank so the vehicle maker has already been paid. The dealer though has to retire his loan(s) to the lender doing his floorplanning. Thus of the $20000 he received he has to send his bank $17000. The dealer gets to keep ~$3000. But from this the dealer has to pay all his sales managers and sales employees and all his sales overhead and mortgage and variable expenses....then himself.
Of that $3000 the sales staff and managers take about $1500. The rest the owner gets to use for his expenses. This is where the tax credits were truely going. But of that $1500 going to the sales staff roughly half of that is immediately taken by the Feds and state taxing authorities in withholdings and FICA. So roughly another $800 to $1000 is immediately sent back to the taxman. This all occured by Sept 15th.
This was occuring in small businesses in every city all over the country in every one of the 50 states and in multiple places in every Congressional District.
Then there are all the accessories and aftermarket purchases made by those 690,000 buyers. These workers saw a HUGE bump in income meaning that the Feds and states took upwards of 50% of their gross income as well.
Then there are the junkyard owners and employees that suddenly received a bonanza of nearly free parts for sale. This group was swamped. After disassembling the vehicle for salable parts they get to crush it and sell the packet to the steel mills for recycling.....and then they get to keep the money....less their taxes of course.
Then....of the extra money received by all these parties consider how may dinners and presents and outfits and vacations were purchased all of which flowed downstream from this 6 week boost. It would take a complex economic model and lot of computing power to layout all the interactions from this simply program....but it seems to have worked as planned.
Then there's all the money that won't be spent on fuel over the next several years by these 690,000 drivers. That money stays in their pockets and doesn't get sent to Big Oil and countries like Saudi and Venezuela. It also doesn't go toward supporting the international price of oil.
Typical Fed/State Marginal tax rate 25%
Typical Fed/State Business tax rate 30-40%
Good response. Does he really think that the average Joe working at the local Chevy dealer will pay a dime under the marginal tax rate? Does he really think that any of the domestic automakers are going to pay a dime under the 30-40% business tax rate?
News flash (on CNN if you prefer): 98% of car salesmen not selling something from Italy or Germany won't have to worry about the 25% marginal tax bracket this year. Many car dealers have trimmed back sales staffs because they're tired of watching them twiddle their thumbs. As to the business tax rate, all of the automakers and most of their dealers are awash in a sea of red ink. 30-40% of profit equals zero tax revenue.
He wants it both ways. He admits that most of the buyers were well heeled paying cash. other than tax in states that charged tax on the credit very little went to the states. In CA for example none of the C4C money is subject to sales tax. So CA will receive LESS in taxes as a result of the C4C Federal handout. And in most cases collect less in gas tax from the newer more efficient car. A big loser for most states. And those are the facts.
The "cash for clunkers" program, which kicked into gear over the weekend, is raising a couple of taxing issues for potential car buyers.
The program can lower the price of a new vehicle by $3,500 or $4,500, depending on the improvement in fuel economy versus the vehicle the buyer is trading in. Which raises the question: Are state and local sales taxes applied before or after the price reduction?
After, according to state tax officials. That would result in additional savings. For example, in Los Angeles, where the sales tax rate is 9.75%, lopping $3,500 off the purchase price of a vehicle would save a qualifying buyer $341.25 in sales tax.
The chart on that link shows that GM and Ford got 32% of the clunker sales. Not exactly a loss.
Back to the per car cost, here's a story about a Delaware study stating that the Cash for Cunkers cost was approximately $2000 per vehicle. This one factors in mpg. (Green Car Congress)
It's a "better" number than Edmunds' $24,000 at least.
Edmunds.com analysts predict that August’s Seasonally Adjusted Annualized Rate (SAAR) could be just over 13 million, this year’s highest by far. However, a week-by-week analysis reveals that this summer has been the industry’s most volatile period in history, due to the government’s Car Allowance Rebate System (CARS), also known as Cash for Clunkers.
“Cash for Clunkers sent the sales rate on a wild roller coaster ride,” said Edmunds.com Senior Analyst Jessica Caldwell. “The SAAR surpassed 19 million in late July, bounced around in the 15 million range early in August and has fallen to around eight million currently. Ending August on such a low note does not bode well for September.”
I don't think anyone in their right mind would try to say C4C did not have a strong impact on Vehicle sales while it lasted. I just believe the negatives outweigh the positives by a large margin. Way less than 1% of the population was a beneficiary of the rest of US.
Actually, it's not even that. The Government just creates the money and makes it on credit. No tax dollars actually spent(though the value of the dollar lowers in response a tiny bit)
BTW, C4C's as been a great success for my family. Our 200,000 mile Buick which was purchased with cash(savings) 9 years ago needs to be retired, Now we're shopping for a new ride with cash(savings) in hand but of course no deals to be found in my neighborhood, all dealers are flush at the moment and want sticker for their cars.
Then there are all the accessories and aftermarket purchases made by those 690,000 buyers. These workers saw a HUGE bump in income meaning that the Feds and states took upwards of 50% of their gross income as well.
Everybody that buys a new car for $30K is going to go out and accessorize it? Right!
Then....of the extra money received by all these parties consider how may dinners and presents and outfits and vacations were purchased all of which flowed downstream from this 6 week boost
Or, maybe they took the money and paid down some of their debt. That's as good an explanation (guess) of where the money went as yours.
ap
Ford surprises with $1B profit; sees profit in '11
Ford surprises with earnings of nearly $1B in 3rd qtr; forecasts 'solidly profitable' 2011
Looks like some of the money went to Ford (Chrysler and GM too).
Gosh, I wonder if the government might think it would be a good idea to do another CFC.
It is absolutely true that from the end of 2008 to June of 09 auto sales were in the pits and those that survived barely did so. Auto sales people with very few exceptions make much more than $30000 in these horrendous times. That's about $2500 per month. However when a sudden bonanza comes along out of the blue and that $2500 month becomes a $10000 month the withholding for that person jumps up as if he or she made $10000 every month.
If the typical sales person was being taxed at 15% in withholdings but suddenly hits a $10000 month the withholding rate jumps up to 30-35% or more. Uncle Sam wants his share of the bonanza right away. If the month is a $12000 or $15000 month then our Uncle gets even more. Then there's state and FICA withholdings to be considered as well. Normally these are fixed rates. But 6% and 15% of a $10000 month is a lot more going back to the States/Feds than of a $2000 month.
Where did the money from the Tax Credit go? It's pretty easy to find it if you understand the process. Mainly the money stayed at the local level at the dealerships, sales personnel, managers, their suppliers and the junkyards that took in the dead clunkers. The elegance of this program is that it put money into system right at the point of sale so that it would be used immediately and turned over immediately downstream to other small businesses. A good part of the money was immediately sent back to State and Federal treasuries in the form of Sales taxes and increased withholdings.
I am very familiar with that flaw in the tax system. I worked 3 weeks straight then was off 3 weeks straight without pay. So when they did our tax deduction it appeared that I made twice as much as I actually made. You have a couple options. Let Sam hold your money and get it back at the end of the year or change your dependents to compensate.
Now getting back to the amount actually coming back in taxes. The salesman makes $1000 on a $20k car. 20% of that was a gift from the government. That means the taxes you pay going back to the IRS is in the area of $60 per C4C sale. The dealer may kick in some if he has a poor CPA which is doubtful and sales tax in the few states that collected it.
I'm happy that you were given a little extra by C4C. That still does not make it good for America. Far more people are out of work in the housing industry as a result of the recession. Nothing in the Stimulus will help them. The First time home buyer credit went mainly to foreclosed houses the banks were willing to finance.
Yes a good part of the bump in earnings may have gone to catching up on or getting ahead of debt.
"The purpose of the speculation was to show how wide-ranging the effects of the stimulus
wascould be"depending on what vehicle you are looking at, i guess sticker could be the asking price.
so what are you looking at?
Hello and if your premise is ture, then what do you suppose the reason is that so many companies and entrepreneurs are leaving the US? ( There have been many articles in the mainstream press such as Barons providing detail )
I for one would love to live in a country where government is much smaller so politicians are irrelevent in our lives.
Poly: (many) Tics: (parasites)
I immediately went to Google and found this in 3 seconds...
http://seekingalpha.com/article/63131-exxon-s-2007-tax-bill-30-billion
I'm pretty sure that Exxon's tax payment in 2007 of $30 billion (that's $30,000,000,000) is a record, exceeding the $28 billion it paid last year.
By the way, Exxon pays taxes at a rate of 41% on its taxable income!
I guess the next thing you'll try and have me swallow is that crude hit $140+/barrel due to supply and demand, correct?????
Back to C4C's for a moment... I love how Ford yesterday presented itself as the only one not receiving bail-out money....What in the world was cash for clunkers all about???? You may want to also Google how much corporate taxes Ford as paid since 9-11. Or I can just tell you!
Companies only pay income tax when they make an annual profit. If they sell $20B of goods but they spend $20B to do so, yes they pay no income tax. But consider that all the $20B they spent went to wages for all their employees who pay tax and social security and medicare taxes, and the company matches those taxes, and the property taxes of their buildings. So a company that pays no income tax still pays plenty in taxes.
And yes I agree that Exxon does pay a lot in taxes, and royalties to drill and move the oil.
http://news.yahoo.com/s/ap/20091104/ap_on_bi_ge/us_cash_for_clunkers
Regards, DQ
A lot of old Ford pickups were traded on new Ford pickups... uh... wasn't this the idea? And, as a bonus, that is a USA based manufacturer benefiting!
14,000 transactions seem to have violated the rules.. 2% of the total... um... okay..
Was it a good idea? Can't tell from this article...
BONUS They quoted Edmunds' CEO..
Edmunds Price Checker
Edmunds Lease Calculator
Did you get a good deal? Be sure to come back and share!
Edmunds Moderator
Maybe those who liked C4C and those who didn't can agree that this discussion can go on forever, and that very few people will be persuaded to change their minds.
My guess is that the votes are there to do it again, at least until the 2012 mid-terms. Boxer may require and get better mpg standards the next time.
If they do it again they should raise the anti up to $5500 for a 15 MPG improvement. Without the goofy rules about not trading a large PU for a small car.
Its easy to dismiss 14000 fraudulent transactions as "okay" because they were only 2% of the total (there were probably a lot more). If you earned $60K a year would you be so casual about getting $1200 stolen from you?
BONUS Learned that Edmunds' CEO is one of the good guys.
That rule never did make any sense, except from the point of view of the D3 who were having trouble getting rid of their new PU trucks and SUVs. Prohibiting the PU-for-small-car trade essentially forced anyone for a clunker F-250 to buy another big vehicle.
As for the environmental concerns, many people are choosing more economical vehicles than just a few years ago, and in multiple vehicle families the newest, most economical vehicles are frequently the ones that are driven the most.
First this bill was formed and negotiated and structured for the benefit of the auto industry, the entire auto industry. Primarily it helped the dealers, their workers and their suppliers. Secondarily it helped the vehicle makers, their workers and their suppliers. Trucks are a huge part of the auto industry, especially the product lineups of the detroiters. So what!! Is it a sin to stimulate truck sales?
Apparently in the writer's mind it is. But this is where the writers lack of knowledge about this program and his apparent lack of math skills ruins his argumentation.
First. He wasn't involved in the program, he's a writer. If he had been involved in the program he would have seen the junk that was being traded in. Mid-90's F150s and Explorers and JGC's were the most popular tradeins. Most were 10-15 years old. All had EPA ratings of 16 mpg or less. However none of these clunks got anywhere near this number if the traders were to be believed. It was more likely that the 13 y.o. F150 with 157K on the clock was barely getting 12 mpg on its best days and 10 mpg or less normally.
So this sinner now trades his clunk for a new F150 that must get at least 2 mpg better FE according to the rules; i.e. 18 mpg minimum. However all new vehicles are getting at least this number if not 5-10% higher in real world driving; i.e. 19-20 mpg
Here's where the writer, apparently not a math whiz, ruins his whole argumentation. He doesn't understand the math concept of 'harmonic mean'. Essentially you can't do any math calculations using averages. The average FE of two cars, one getting 20 mpg and the other getting 10 mpg, is not 15 mpg!! It's 13.3 mpg.
A clunker trader that was getting a daily 12 mpg on his old vehcle used 8.5 gallons to go 100 miles. In his new vehicle he is now getting 19-20 mpg or 5.2 gallons to go 100 miles. That doesn't sound like much until you put it in context. This trader is saving himself and the country 495 gal /yr every time he drives 15000 miles. At $3 a gal that's $1500 he keeps.
Which trade-up saves the most fuel for the owner and for the nation?
Clunker F150 to new F150..... saves 3.3 gal to go 100 mi driver or 495 gal / 15000 miles driven.
'04 Camry I4 to '10 Prius ( 24 mpg vs 50 mpg ).... saves 2.2 gal to go 100 mi or 330 gal / 15000 mi driven
'02 Taurus 3.0L to '09 Focus ( 20 mpg vs 27 mpg )....saves 1.3 gal to go 100 mi or 195 gal / 15000 mi driven
The ones who do planning at the deepest levels of the government have already decided that the strongest way to get the nation to save fuel for our future use is to get older trucks and SUVs off the roads. Replace them with more efficient vehicles.
It's much better for minimizing fuel usage to get a truck owner to kill off his old clunker and get a new one than it is for a Camry owner to trade up to a brand new 2010 Prius getting 50 MPG!!
Ford stopped burning cash.
GM said it's even keeping Opel.
Positive side effects of C4C, perhaps?
The dealerships loved the program. They will make their voices heard. Since the apparatus is already in place a once-a-year program like the annual bulk trash pick up in most localities might be an event to look forward to see. [cue: groans throughout the galleries]