Cash for Clunkers - Does it Work for You?

ateixeira

Not just cars, mortgages too. I got a good rate, lucky timing perhaps, but the process was a nightmare compared to the streamlined re-fi I did a couple of years ago.

My credit score is 812, too.

euphonium

A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.

A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year. So, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year.

They claim 700,000 vehicles – so that's 224 million gallons /year.

That equates to a bit over 5 million barrels of oil. 5 million barrels of oil is about ¼ of one day's US consumption. And, 5 million barrels of oil costs about $350 million dollars at $75/bbl.

So, we all contributed to spending $3 billion (of Taxpayer money - - appropriated & spent by Congress !!) to save $350 million.

How good a deal was that ???

They'll probably do a great job with health care though !!

tidester

we all contributed to spending $3 billion (of Taxpayer money - - appropriated & spent by Congress !!) to save $350 million

Yes, but over the 10 year lifetime of those new vehicles we'll just about break even! :P

On the other hand, most of the clunkers that were traded in probably wouldn't have lasted through 10 years and likely would have been traded in for ... drum roll ... more fuel efficient vehicles. Break even can be elusive.

tidester, host
SUVs and Smart Shopper

kdhspyder

You have correctly done the math....for one year. Now consider the effects of these non-existant vehicles being off the road for then next 'X' years and multiply your $350 million by 'X' years.

That's just the savings for the nation from having the vehicles off the road.

But the other key points you missed in your SOTP analysis is 'how much additional taxes were generated by this program?' For the months of July/Aug revenues at millions of jobs and businesses across the nation jumped by 10-30%. A jump in revenue means a jump in taxes paid/due. A good estimate is that of the $3 Billion allocated to the public the government immediately collected about $1 Billion in taxes. Net cost....$2 Billion. Slick.

Now...you can begin to factor the savings for the nation in money not spend for fuel over the next 'X' years. The net cost for the nation is about ZERO.

If the healthcare program works as well as this...it will be a raging success. Only the chronic complainers will continue to complain. But they can't be helped.

stickguy

the gas savings was just a red herring or smoke screen.

This progagram was all about giving a bailout to the auto industry, without just handing over the money like with the banks.

hey, maybe that's what the banking bailout should have been. Give everyon that payed takes last year but made less than 75K $500 in a bank account!

also, the taxes are 2 different pockets. The feds paid the 3bill, but the sales tax windfall went to the states and sometimes local coffers.

2doorpost

Looking for a second vehicle in the house.

Actually starting to see some C4C purchases in the classifieds already due to payment issues and / or buyer's remorse.
C4C just might work for me after all..

stickguy

well, depending on what you traded in, what you bought, and how good a deal you got, it si possible that someone might be able to turn a profit by flipping the new cr.

if you traded in a $300 POC, and got a killer deal on something that holds value (say, a civic), you might be able to resell the civic now with barely any miles, and take less than the $4500 C$C bonus in depreciation.

pay 17K, sell for 15K, still a couple grand ahead.

kdhspyder

No, and yes partially. The main beneficiary of the increased level of business was the IRS. :surprise: My income doubled in July and Aug over what it had been the prior 8 months. Ditto all my fellow sales people, F&I guys, aftermarket ladies, aftermarket vendors, truckmen, distribution people, etc, etc etc. If my income doubled .... Uncle Sam's income doubled too. So did all the states that have state income taxes.

Then there are the dealers and vehicle makers and all the suppliers to each of these two huge groups. Their business jumped by 30% so the IRS is due to receive a bunch of money on Oct-15 when the quarterly taxes are paid.

And yes the States did make out like bandits as 690,000 vehicles generated state sales taxes of about $700 million in a 6 week period. Windfall from the pockets of those that can afford it the most. The wealthy and well-organized.

The people that organized this and put it into motion were and are awfully awfully smart....and there's a lot of them.

rik1

Has anyone heard of being charged a MV Fee on the clunker? I paid an estimated MV Fee on my contract, which I assumed was for the new vehicle that I bought and expected a refund of the difference. When I received the check there was an extra $20 taken out which the salesman said was for the clunker vehicle (transfer of registration or something to that effect). I know its only $20, but its the principle.

Also, the salvage fees - is that something that's automatic, or something that should have been negotiated before and entered on the contract?

Thanks.

srs_49

If my income doubled .... Uncle Sam's income doubled too.

C'mon, Bob. You know better than that.

If your income doubles for 2 months of the year, and remains at the same, lower level for the other 10 months, then your annual income has only increased ~17%, which is what your taxes are based on.

ateixeira

Just 8.6 years to break even, wow.

Great deal when you put it that way.

Also, less demand on oil lowers energy costs and helps the entire economy.

kdhspyder

Good point, I was imprecise.

I stated..
My income doubled in July and Aug over what it had been the prior 8 months. Ditto all my fellow sales people, F&I guys, aftermarket ladies, aftermarket vendors, truckmen, distribution people, etc, etc etc. If my income doubled .... Uncle Sam's income doubled too

I should have stated that 'Since my income doubled in these two months then Uncle Sam's collections from me and others who benefitted from the program also increased similarly.'

You're right the annual receipts for the IRS didn't double and even the monthly receipts didn't double. But the monthly and quarterly receipts to the IRS from those involved in the program did jump significantly for those two months. That's money that the IRS wouldn't have otherwise received if not for the C4C program.

michaellno

A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.

A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year. So, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year.

They claim 700,000 vehicles – so that's 224 million gallons /year.

That equates to a bit over 5 million barrels of oil. 5 million barrels of oil is about ¼ of one day's US consumption. And, 5 million barrels of oil costs about $350 million dollars at $75/bbl.

So, we all contributed to spending $3 billion (of Taxpayer money - - appropriated & spent by Congress !!) to save $350 million.

and

On the other hand, most of the clunkers that were traded in probably wouldn't have lasted through 10 years and likely would have been traded in for ... drum roll ... more fuel efficient vehicles. Break even can be elusive.

I don't argue with either of the above, but ....

You're making the assumption that the clunker was being driven 12K miles per year. Many of the clunkers that were traded may have been 2nd or 3rd cars and not had that many miles put on them. Now, they've been traded in for cars that get much better mileage, and the new cars may now be the primary vehicle for the family.

Now, the annual savings is less than $350M per year.

I agree that the point of the C4C exercise was to give a shot in the arm to the manufacturers and dealers, not to save money in reduced gas consumption, but there are too many variables to accurately calculate any sort of dollar savings in consumption.

I'm just sayin'

euphonium

CASH FOR CLUNKERS UNINTENDED BENEFIT: ...........

THOUSANDS OF OBAMA BUMPER STICKERS REMOVED FROM THE ROAD.

dtownfb

Or potentially 650,000 additional voters. :shades:

fushigi

Let's do a hypothetical.. Primary car: 2005 Malibu getting (wild guess) 24MPG average, driven 14K miles per year. Secondary car: 1995 Explorer getting 14MPG (again, wild guess; I'm not looking up mileage figures so feel free to substitute another brand/model if needed to get the appropriate MPG), driven 7K miles per year. I'd hazard a guess not too many 2-car households drive less than 21K miles per year. (I'll admit my household doesn't as I work from home most of the time but I'm definitely more the exception than the rule.)

Using C4C, the Explorer is traded for an Escape Hybrid getting 28MPG. The Escape becomes the primary (14K MPY) and the Malibu becomes secondary (7K MPY).

Gas usage before: 14K/24 + 7K/14 = 1083 gallons/year
Gas usage after: 14K/28 + 7K/24 = 791 GPY

That's 292 gallons saved. Not far off from the 320 gallon derived above; less than a 10% difference.

That's also, at current prices, around $800 per year that the consumer saves on gas. Also, few would argue that maintenance costs on the new car will be dramatically less than the clunker so the consumer saves even more. Those savings will be reinvested in the economy by either being spent (driving the retail economy) or saved/invested (driving the financial industry). I'm guessing for many it would be saved/invested since it seems the bulk of the C4C transactions were for cash so the buyers would want to rebuild their investment portfolio.

ateixeira

If you need 3 cars you probably drive a lot!

That describes me. I commute in my Miata but my minivan still gets 10k miles per year at least.

stickguy

you forgot 1 aspect. Who says they wil lbe saving $800 a year, since they have to pay the 20K+ for the new car somehow.

That, and I imagine any clunker was running liability insurance only. At least in NJ, going to full boat insurance will cost more than the gas savings!

jeffyscott

If you need 3 cars you probably drive a lot!

I don't know about that, sometimes you just end up with an extra and it is not worth getting rid of it. We have 3 and do not drive a lot, my wife and I only put 7000 to 8000 miles per year on each of our main cars.

The extra (coulda been a clunker) minivan does not get driven much at all by us. Since it is not worth much, we just keep it to have around for carrying stuff maybe 1-3 times per year and make it available to our 3 adult children in case they have problems with their cars (or want to use one temporarily in the case of the one that does not own a car).

ateixeira

since they have to pay the 20K+ for the new car somehow

Only if the new car cost $24,500 or more after discounts and the $4500 credit.

Focus, Civic, Corolla - many cars well below that cost.

...

I put that many miles on my 3rd car (minivan) and neither of my kids are driving yet!

gagrice

My CPA bought a new Sonata. He went in and looked at them the end of July. The showroom was crowded and he decided to come back after he went to a conference. When he went back in first part of August the price was higher and the selection slim. He found out the C4C program caused all the problem. He still bought but was miffed at just another waste of tax dollars as he put it. He really likes the car in spite of it costing him about $1500 more than it would have in July.

ateixeira

He found out the C4C program caused all the problem

Whoa, whoa, whoa.

We've been spoiled by a buyer's market for years. Dealers are squeeking by on service profits alone because everyone was getting their car at cost (and even getting the holdback).

For the first time in years dealers can actually get a small profit, and that's a problem?

Then your friend decides to buy anyway? And he puts the blame on someone else?

This is supply and demand at its finest. If he thought it was a problem, he should not have bought the car, the market would bring the price back down if enough people did that.

It's not a problem, it's supply and demand at work.

He should have bought the car when it was $1500 cheaper.

gagrice

I am just telling you what his feelings were about the program. I am sure he would have bought the car at a cheaper price if he knew what was going on with C4C. He just happened to pick a bad time to buy. So that was a problem for him. While it was a benefit for the dealers and those with old wrecks. C4C was not a great program for everyone buying cars during July and August. Don't expect me to cry tears for car dealers. There are a lot of people hurting that have not gotten the golden handout from Barry and the Congress. A much bigger segment is the construction industry across the Nation. The auto industry is small potatoes compared to those in Construction out of work. Oh I forgot the traffic cones and men working signs bought with stimulus money. :shades:

kdhspyder

The personal money savings are not as important as the national financial benefit of 700,000 people NOT spending $250 to $350 annually on fuel every year for the next several years. That's money NOT going to support oil.

I don't know if you're in the auto business or not but from our experience as the largest recipient of turn-ins in our market and the 2nd largest in the state of VA the people that took advantage of the program were the very ones targetted. These were the well-to-do and well-organized who normally would NOT have traded in their clunker .... except that the deal was too good to pass up. Many just paid cash for the difference. This money went into the national economy. It was the very definition of stimulus. The Feds offered up ~$4000 on average and the consumer took $15000 to $25000 out of their own pockets.

If they had to add full insurance then that's simply another benefit to the economy as a 'stimulus' measure. Insurance companies got a boost as well.

For those that didn't pay cash again our experience was that the typical buyer was older, conservative and well-financed. The banks and lenders got the advantage of placing loans with these highly desirable consumers. This improved the loan portfolio's of the various lenders.

Again the reiterate, this was probably one of the best-designed shortterm programs I've ever seen from any government.

Also we got all our money.

kdhspyder

I think that your CPA is going to be doubly PO'd when C4C part II comes around next year. BTW I wouldn't go to him for any stock picks. He couldn't be bothered to wait to take advantage of C4C part I so he left, then he came back and paid a premium after C4C ended ensuring that he would miss out on part II if it comes around.

gagrice

It is good to see you admit that the CONSERVATIVES in this country made the program a success. The two I know that used the program fit that demographic. Only pay cash and are very conservative. They felt it was a chance to get back a bit of the tax money dumped into the treasury each year. Both bought Fords, Escape and Fusion.

gagrice

My CPA did not have a qualifying clunker. He still has his 99 VW Beetle with over 200k miles. His business is taxes not stock picking. I am sure when the lots get full they will print up more money to try and fix what ain't broke. Look at Japan, they are just not buying as many vehicles as they used to. Better get used to 11 million per year. People making minimum wage do not qualify for new car loans.

ateixeira

Your friend has to realize that he created the problem by buying at the wrong time. He enabled dealers to charge more by not walking away.

It's his own fault! 100% blame goes to him.

Supplies dwindled and are still recovering now. In a month, two tops, prices will settle back down, as supply reaches normal levels again.

Didn't mean to shoot the messenger, it's just that my pet peeve is people that do not take personal responsibility for their actions/decisions.

If Person A thinks movie tickets are too expensive, then don't go, or at least go to a matinee or something. Don't buy tickets to a sold out Friday night debut and then complain that it's crowded and the ticket prices are high.

DUH. They're high because Person A is still willing to pay, and it's crowded because there are enough people like that who choose to go! :mad:

I find the complaining ironic, even absurd.

For the record, I buy discounted tickets in advance ($5.50 or $7 instead of $10), and go on Wednesdays when Movie Watcher members get free popcorn for each ticket purchased.

Person A would foolishly pay $10 for his ticket, $4 for a small popcorn, and whine about it the whole time. For less than half that amount I watch the same movie in a theatre that isn't crowded to boot. With free popcorn.

Apply the same smarts to car buying, I say. Don't buy that hot new model that just came out, we all know it will cost 10% less in a month or two, 20% less after a year when rebates appear.

And if you don't, at least don't complain.

oldfarmer50

"...when C4C part II comes around next year..."

You're kidding right?

mikefm58

people that do not take personal responsibility for their actions/decisions.

I find the complaining ironic, even absurd.

Well said!!!

joegiant

TOTALLY off topic so for the rest of ya, just hit "skip"...

Where, if you'd be so kind ateixeira, is the "Free Popcorn Wednesday" theatre's you mentioned? By chance is it a national chain or a local-yocal one-of-a-kind? I view movie's exactly as you..for those worth going to see on the big screen that is which is becoming more and more rare these days btw. Always off hours, never crowded, at my convenience. But for free popcorn, I gotta amass "points" on my movie card (Regal Cinemas) for the free stuff after having spent so much beforehand.

TIA

Joe
PS Just can't replicate at home the buttered popcorn at the movies. Bucket of course. Layered!

kdhspyder

Hardly.

The original program was intended to last 12 months, use $4 Billion in stimulus money and get about 1 million clunkers off the road replaced by 1 million newe more efficient vehicles.

It lasted 6 weeks, used $3 Billion and involved about 700,000 units. It worked like a charm, with a few hiccups. Hmmmm, not all the money was used.

I'd bet on C4C Part II. It may even become an annual event on a more limited scale. Call this past C4C 'the trial run'. Nothing this successful will simply be kicked to the curb. The US public obviously loved it. Hey, it's OUR money afterall. Why shouldn't we get the benefit?

ateixeira

I have 2 memberships...

1. Regal used to offer free popcorn on Tuesdays. I don't think they do any more, but you still earn "points" for free stuff. Not as generous as the plan from ...

2. AMC/Loews. They offer a free small popcorn for every person who buys a ticket on Wednesdays. 12 tickets, 12 bags of popcorn, everyone gets one. Plus you get points and every 5th ticket gets you another freebie (drink, more popcorn, or free tickets).

So naturally we go to AMC/Loews. It's called the MovieWatcher club, and it's free to join:

http://moviewatcher.com/

Smart people figure out supply and demand. Go on a slow day, when demand is low, and pay less.

The ones who complain the loudest simply aren't as smart! Sorry but it's true.

Be Smart! Same with cars, folks, so this is very much on topic! :shades:

ingvar

He found out the C4C program caused all the problem
100% false. His greed and stupidity caused the "problem". I'm looking for a new car. I'm going to buy it as soon as prices drops below pre-C4C time. If some idiot has "burning desire" to buy a car it is his problem

kdhspyder

...and furthermore....

http://www.greencarcongress.com/2009/09/ucd-c4c-20090922.html#more


The study also suggests that a long-term Cash-for-Clunkers program may be more suitable to CO2e reduction because with such a program policymakers could send a clear, long-term signal to auto manufacturers for more fuel-efficient vehicles. Considering the 4-6 year vehicle product planning, design, and introduction cycles where major retooling of automobile plants is needed, the researchers said, such longer term programs could actually induce technology changes.

long-term C4C... :surprise: ????

gagrice

Why not? Just keep C4C going until every clunker is off the roads. Can't be more than 100 million of them out their. They need to raise it as the flow slows. I will be really tempted if I can get $5500 for my 99 Ranger.

kdhspyder

I'd guess that there's a good 50 million of them hiding in the bushes....a few less now.

gagrice

That is only about a quarter of the stimulus package at $4000 per clunker. I think the rush was induced by the small figure and the initial surge of clunkers. I think it would be pretty slow rolling if there was no time or dollar figure involved. A lot less stressful.

gracenumber2

I purchased my Sentra on 7/24/09 after much research here on Edmunds- THANKS ya'll. And 2 months later: With insurance and payments being made, STILL enjoy everything about the deal and the car...
Went from 12 MPG on the old 93 Bronco to over 30 MPG on the Sentra and THAT cash out for gas savings covers more than half the additional expenses monthly. It is wonderful knowing I can get to my job and visit grand kids and truely believe this purchase was one of the best transactions I my life.
just one point.. At gas 2.5 p gal... Spent $50.00 weekly gas on commute, NOW spend about $18.00. I gotta say THANKS again EDMUNDS... I am a single woman that navigated the purchase with only your help.

ldisler

Got a call from my dealer that they need me to come in and sign another form so they can get the clunker money. I took delivery on 7/24/09 and have my tags and title. I guess the dealer is at my mercy now !!
I'm going to read this form very clearly.

mikefm58

Got a call from my dealer that they need me to come in and sign another form so they can get the clunker money

Yeah, so they can get it from YOU in the event the fed denies the claim, which they probably already know the answer to that one by now.

ateixeira

Congrats.

ateixeira

This is one of those BE CAREFUL WHAT YOU SIGN moments.

If you aren't 100% clear about it, don't sign squat.

euphonium

The "paper" can be altered by both parties prior to signing. If you are inclined to sign, insert the following.

It is understood and agreed that the Seller will not hold the Buyer responsible for any additional payments on this transaction.

ateixeira

Good idea, put that right above your signature.

oldfarmer50

"...It may even become an annual event..."

So you're just assuming it will continue. I thought you might have heard something from the government.

Maybe I should keep my old 85' Ford truck around for another year. I'll just hold my feet up so they don't drag on the ground. :lemon:

oldfarmer50

"...Regal used to offer free popcorn..."

Regal is a monopoly in my area which owns 99% of the movie houses. So they don't give free NOTHING.

berri

I've noticed that after CFC cleared out the inventory, car dealers are now advertising cars for a grand or so more than before. This is what happens when the gov decides to butt into the marketplace. Probably a good idea to sit back awhile before buying a car and let equilibrium come back to the market.

ldisler

This was a false alarm. The paper was for a $500 rebate that Mazda had, not govt CFC cash. They couldn't get the rebate from Mazda without it. Overall very happy with this dealer on the CFC transaction. If your in NJ,NY or PA area try Hamilton Mazda.

PS. They must have gotten the CFC money because they no longer had my clunker.

Thanks to everyone for your concern on this form being signed.

ateixeira

This is supply and demand at work:

September U.S. sales will plunge, J.D. Power says

That's a headline from yesterday's Automotive News.

2 reasons:

* supply is low
* prices are high, so that has hurt demand

People are not buying at those higher prices.

That market has a way of stabilizing itself.

It's actually good because it gives dealers to re-stock and get inventories back to normal levels. 60 days' supply is the norm, and some were down to basically almost none after C4C.