Car Guy
Clunker Program Throws a Rod
Don’t worry — after a quick fix it’ll throw two rods at once.
(Page 2 of 2)
Meanwhile, there’s a rush (temporary) on new cars, since $3,500-$4,500 off the sticker price is a strong inducement for consumers. On the other hand, has it occurred to anyone that a government subsidized new car at $3,500-$4,500 off sticker price is not a “sale”? The government is basically paying people to buy new cars.
What happens when the subsidies dry up?
Looks like we’re about to find out — as the kitty is already running dry.
So naturally, lawmakers are scrambling to find more of your tax money to give away in order to keep the shell game going. Michigan Rep. Candice Miller says “… this is simply the most stimulative (sic) $1 billion the federal government has spent during the entire economic downturn… the government must come up with more money, immediately, to keep this program going.”
Rep. Miller, it should be noted, is a Republican. Weren’t Republicans supposed to be against Robin Hood-style giveaways?
A fine mess you’ve got us into, Obama!
About the Author
Eric Peters is an automotive columnist and author of Automotive Atrocities: The Cars You Love to Hate (Motor Books International) and a new book, Road Hogs.
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Rocco| 8.3.09 @ 6:45AM
My, my, isn't this just lovely. Here we have a bull$hit program being run by the same bunch of idiots who wants us to trust them to run our heath care and manage the significant portion of our GDP that it does. It seems that this is all a bad dream, but after waking up, reading the morning news serves as a bucket of ice water and a kick in the a$$ at the same time.
Why do we keep putting these same jerks in office, year after year??? (question is rhetorical).
jwhenry | 8.3.09 @ 6:49AM
I beleive this new legislation is a big win for consumers who is ready to buy a new car with fuel efficient models
Henry
Blogger
www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info
Robert Rosencrans| 8.3.09 @ 7:07AM
Once again we have the government taking the role of a retarded Crusader Rabbit. By authorizing more deficit spending, the government has taken the classic bubble approach to an industry which entails buying current appearances of prosperity and success while laying the groundwork for a future disaster when the rebates disappear.
In the meantime we have Geithner lying to the public about getting deficits under control while Lawrence Summers appears on Meet the Press tripping all over his tongue claiming that baselines changed and that's why unemployment is going up and the stimulus didn't work right away. These two clowns should be sent packing. Give them a clunker rebate and a new car so they can leave town.
In the meantime the rebate program met success because it is a tax cut. Just not the right type. When those rebates disappear, car sales will plummet, and unemployment will increase.
At that point more clowns from the Obama administration will appear on shows like Meet the Press and they will have more excuses for their failures.
The public doesn't buy excuses but maybe Obama and his financial triumvirate can come up with another rebate program and continue to create bubbles over the next two years until the merciful end of rearranging deck chairs on the Titanic.
drudge ette obama| 8.3.09 @ 7:10AM
Stop the program. We will save $2 billion. Besides, I am actually in the market for a new car with my 1995 Nissan Maxima on its last legs. It is the height of a slap in the face to provide the tax dollars for others to get a $4500 check, only to find out that your own car isn't clunky enough to qualify. Patriots should refuse the rebate.
Eric Damon| 8.3.09 @ 7:10AM
What a boondoggle! The Democrats dream up this silly idea of giving away money for other people to buy new cars is crazy, and is not going to really help the industry at all. The money being spent may help in the very short term, but it is not indicative of any upturn in consumer confidence. It's like if a clothing company had a BOGO sale, and the government paid you $3500 to buy a new wardrobe; you would buy the clothes with the government money, but it will be a one time bounce.
And what about the used car dealers and markets? Not everyone, me for example, can afford to commit to buying a new car at this point...but I could be in the market for a well maintained used vehicle. But under this stupid plan, perfectly good cars are being destroyed to fulfill some crazy political scheme. The new car dealers are reaping profits from this, while consumers get hosed!
Christopher Holland| 8.3.09 @ 7:18AM
If Republicans are supporting an idea as stupid as this one then the recession has a long way to run.
TennesseeVolunteer| 8.3.09 @ 7:37AM
I was against the stimulus and wanted tax cuts for individuals, business and capital gains cuts. Since we had the stimulus, all this clunkers show is that if you had put the money in individuals hands, they would have spent it right away and we would be almost through this whole thing.
Of course, if our government had known that, we would have so much more confidence and the 13 Trillion that is on the sidelines in the market would be in play also.
Unfortunately, our government is being run by the Village People and we'll have to hit the bottom before we can come back.
Big J| 8.3.09 @ 7:46AM
Couple this ridiculous transfer of wealth with a program that Government Motors is offering (up to a complete match of the government rebate), and G.M. has a distorted advantage over Ford.
Not that I expected anything else. You see, Big Brother doesn't need to make a profit. When the money runs out, they confiscate more from the private sector or simply switch the printers on.
This should be an excellent preview to the up and coming Health Care Show.
Can't wait.
Curly Smith| 8.3.09 @ 7:53AM
"When you give stuff away for free it tends to go away fast. The government, of course, seems not to understand this concept. Perhaps because it is other people's money it is always giving away."
Not true. If the program had been pork to campaign contributors then it would never have run out of money. What the program does is give self-selecting taxpayers a tax cut which, shockingly, stimulates economic activity. That, of course, is the surprise to the geniuses in Washington - finding out that tax cuts stimulate the economy and kickbacks to special interest groups only stimulate more corruption.
Paul| 8.3.09 @ 8:02AM
The clunkers program is so un-American I don't know where to begin.
However, as anyone else noticed that the President and his Press Secretary look and sound increasingly just like Detroit's auto executives for the past 20 years, extolling the success of their latest rebate and incentive plan ?
It would be funny if it wasn't so darn serious!
Mike from Florida | 8.3.09 @ 8:06AM
Whether the program is good for the economy or not, the federal government doesn't have the right give away $1,000,000,000.
Michael L. Hauschild| 8.3.09 @ 8:07AM
All the rich people who can actually afford a new car (I am not and can't) will wish they had that purchase balance in the coming months. I will have trouble replacing my aging "clunker" because there are no high end used cars on the market. There are two things that made money in the last depression, junk yards and bars; now half of that economic fallback is gone. I wonder who is policing all the "destruction" of perfectly serviceable (obsolete term) vehicles?
Sean| 8.3.09 @ 8:22AM
It is another example of government interfering in the free market. Poorer people need these clunkers in fact many middle class families need them for their children. The government should not be promoting destruction of wealth. First America loses a working car. Then the taxpayers are out 3500-4500.
Jen from Ohio | 8.3.09 @ 8:25AM
This article does not mention buyers will also have to fill out a 1099 form for the IRS on their cash for clunker, and will have to pay 15% tax on that $4,500 clunker 'rebate.'
Lawrence of Lutz| 8.3.09 @ 8:28AM
Can people driving "clunkers" afford new car payments? When will the repo's start? Will people who can afford to buy "used late model autos" get a good deal? Will the finance companies run to Washington for a bail out?
Tim| 8.3.09 @ 8:41AM
SOVIET INDUSTRY IS BUILDINK MORE TRACTORS!
Becky| 8.3.09 @ 9:01AM
Big J and Paul are right on. I expect GM to go bankrupt again. The government has discovered how to run a car business and spur sales, and suprise, it's very much like the last group of execs did. Where is the exciting new product lines? Haven't heard about those, just the rebate money.
When the incentives go away, so will the sales. They are also pulling future sales, so what will be the next marketing campaign to spur sales next year? Lower credit scores, more rebates, etc.
Another government bubble in the making.
Anastasia Mather| 8.3.09 @ 9:03AM
My 1991 Honda Civic gets between 36 and 39 mpg. What car will I be able to afford now that gets that kind of mileage? And there go all those other old Hondas that we sift through the junkyards in our area to get parts. We'll have to spend more on new parts if they're still made.
Where is the economy in this? Where is the earth friendliness?
Becky| 8.3.09 @ 9:06AM
I wanted to comment that I always liked Candace Miller (she is not my rep) and let others know that she was the Secretary of State who did a very good job in that position. It disappoints me that her comprehension of the car industry, including the used market seems so shallow.
PAT| 8.3.09 @ 12:42PM
Sure it has a silly nickname but Cash for Clunkers is a hard-working, multi-tasking, multi-goal program that is working even better than expected for Obama. Helping your neighbor buy his new car with your taxes is just another version of a typical Democrat swindle in return for votes. But look at those other "cool" side benefits going down with this slick piece of legislation.
First, GM and Chrysler don't have to offer a "loyal customer $3,000 rebate" or a "because you don't smoke $2,500 rebate" - they can now charge the dealers their wholesale price and actually keep the money rather than forking over their profits in rebates. And guess who is president, CEO and chief stockholder of GM and Chrysler - if they look good, he looks good.
If you're gloating that Toyota and Honda dealers are participating in the program as well - so what? That helps Obama with the environmental folks who want a sign from Washington their interests are also being serviced, not just those autoworkers in the midwest. And, don't worry, Obama is handsomely paying off his Michigan supporters and those loyal Democrats in the UAW through other means - for example, whether you know it or not, you recently gave GM several hundred million to refurbish a manufacturing plant in Orion Michigan which will start producing "fuel efficient cars" - in fact GM collected millions more from the feds and the state of Michigan than the refurbishment will actually cost - wonder what they'll do with the extra money? The Michigan Democratic Party frequently blesses Obama's name and the UAW slobbers all over his ring finger - there are many ways to help Michigan in addition to rebates.
Another Democratic hallmark is also missing from this program - you don't have to be poor to participate in this slick scheme - that's right, there's no limit on your annual income to play in this game, you don't have to make less than $25,000 a year - and that's a radical departure from the usual "tax the rich, give it to us" programs. Of course, the poor don't buy enough new cars so the usual "we're helping the unfortunate" swindle wouldn't have worked here - Obama needs massive numbers of new car sales, not cheers from 3 lesbians and a minister on the Far Left.
All in all, this is one incredibly smart program on Obama's part - you may not like it but hurry down to the showrooms before the offer expires.
Pingback| 8.3.09 @ 1:04PM
Rocky Mountain Independent » RMI Archive » Love it or hate it, Cash for Clunkers has links to this page. Here’s an excerpt:
Ryan| 8.3.09 @ 1:06PM
One interesting turn - this is also helping Ford, and is, in a sense, a little bit of a backdoor bailout for them without the government strings.
I own Ford stock, btw.
Robert Rosencrans| 8.3.09 @ 1:52PM
One angle to this story that is not getting any notice is the administrative costs for over seeing the program. One article that supports the program admits handling fees to dealers and other costs will total 5 billion. That means to spend this one billion an additional 5 billion in overhead is required. Those costs will be offset by salvage costs of $1,000 per vehicle. However, that could actually drive the cost of steel and other metals down.
Think about how that programs overhead looks so substantial and just transfer that thought to health care.
Paul D| 8.3.09 @ 2:03PM
Eric,
There are a couple of errors in your story (Not that I'm for the program, mind you)
1. You don't get the check if you trade in an 18 mpg for a 22 mpg. There has to be a 10 mpg spread to get the full $4500.
2. The "clunker" that is turned in must be destroyed, but junk yards are allowed to salvage it for parts.
What surprises me is that so many people actually have cars that qualify for the program. Most people I know of who actually own a qualifying clunker can't get the credit to finance the rest of the purchase of a new car, even with the $4500 discount.
JP| 8.3.09 @ 2:22PM
I thought about going to the junk yard and find one of those really huge boats from the 1960s or early 1970s - like the 1967 Plymouth Fury. I would have to slap some bald tires on it and have it towed. Not to mention, I would have to get it licensed and insured for 1 day. Just think of the look on the dealer's face if I was to have this thing dropped into his lot. If it ran, it would only get 5 or 6 miles a gallon tops. I could easily get a nice Tahoe and still the dealer could show gas mileage improvement.
I wonder if there's a run on junk yard cars yet?
Roy| 8.3.09 @ 2:25PM
Paul - yeah, but it seems like there ought to be a way for an enterprising soul to arbitrage it nonetheless. Say I own a piece of junk that is not worth $3,500(if it is, I would be an idiot to sign up for this program).
You want to buy a new car, so you give me $3,500 for my piece of junk, then hand it over to the government and pocket the $1000 difference. Meanwhile I go out and buy a slightly better piece of junk with my new $3,500. Everybody wins! Except the taxpayers of course.
Robert Rosencrans| 8.3.09 @ 2:43PM
To JP: You have to have owned the car for a year before you can go Neighbor's Cash to You For Your Clunker.
Marc Jeric| 8.3.09 @ 3:27PM
The standard career of an American youth or of a recently arrived legal immigrant consisted of: a)future student borrows a few hundred dollars from his parents and buys his first car - an old clunker; b) immigrant works for a few months using the bus, saves a few hundreds, then buys his first car - an old clunker; c) after the sudent finishes his studies and gets a first job, or that immigrant gets promoted to a supervisor, both of them trade their old clunkers and buy new cars. Now, with all those old clunkers junked - how will our students and immigrants get a car? Well, they can board those busses - provided the union is not on strike.
aware| 8.3.09 @ 3:57PM
Another classic case of bubble blowing. OK so now a person who did not have a payment now has a payment and higher insurance costs to boot. Car dealers are smiling and thinking about increasing inventory.
Then car makers start to figure its time to call back 2nd shift and increase production.
Government hacks get to tout upticks in their highly selective economic numbers. The MSM will trot out "experts" to spark up the "Happy Days Are Here Again" chorus.
And the sheeple will be mesmerized into believing "we've turned the corner".
Temporarily, that is. Then this bubble pops when the repo man is hooking up many of these formerly new cars.
NOTHING is changed in this. The same stupid people borrowing instead of saving(Important Note: At the State's lead,AGAIN!!!!can you say subprime?), buying the same products that are overpriced and immediately depreciating, made by the same corporations that operate on business models that have made them bankrupt, with money from the same banksters who have proven themselves to be abject failures in risk assessment and loan management.
And all planned and supervised, sorry "regulated" by the same corrupt State apparatchiks who have and are proving that they don't have a clue as to how a market economy even works, much less how to make it "better".
The only thing that's changed is the State has poured about $50 billion of our tax "donations" on top of this stinking crap pile (Actually, promises of our future tax "donations"). And that's just one of the SMALL piles!
How is "recovery" even possible with these conditions and with the current crop of rat bastard politicians?
Richard Baker| 8.3.09 @ 4:45PM
The government has an on-line site telling dealers how to properly disable the car to make it a clunker. Sounds like a Mafia chop shop to me. Wonder what all the Obama lovers/supporters think of their boy now? Hope and Change, yeah right!
Not Sure| 8.3.09 @ 4:55PM
There simply are no adjectives to adequately describe the stupidity of this Administration, Congress and Senate in all things economic.
Pat| 8.3.09 @ 5:39PM
Imagine you needed massive new car sales for your adopted children, little GM and baby Chrysler - what would you do? Imagine also you needed those volume sales at a good profit, not an emaciated, after the customer rebate profit - what would you do? Think a "cash for clunkers" program might help? Think a rebate paid by taxpayers rather than the automakers would give little GM a hefty bottom line jolt?
Is anyone objecting when you see a shiny new car sitting in your neighbor's driveway - and you helped pay for it? Well, certainly folks living in the Detroit area aren't objecting, they have a genetically determined sense of entitlement and are gladly willing to rob everyone else to save themselves. Visit the Detroit Free Press' website (freepdotcom) and you'll hear the party line in excruciating and boring detail.
And don't mistake this for another of those endless "help the poor" programs - this is strictly help the UAW - even the Michigan Republicans, those die hard conservatives, are clamoring for more cash for clunkers, light rail funding, highway construction handouts, you name it - just give us some money and fast. Obama promised to save Michigan while saving many other things but you wouldn't know it from the endless complaints streaming out of the Detroit media. Not enough money, not fast enough, not a good situation, even the usual Happy Talk can't lift the gloom.
And the experts say Michigan's employment probably won't revert to anything resembling normal for 7 more years. Many automotive jobs will never return. Retraining sounds good, but former autoworkers find to their dismay they aren't going to make $28.00 per hour with benefits even a federal employee would envy after state and federal retraining funds are spent. Dismal prospects is putting it lightly. So, rather than resent it, remember you're saving an entire state, an industrial region in America's heartland - feeling better now?
mikedudical| 8.3.09 @ 6:51PM
I'm waiting for this next wave of buyers to lose their overpriced cars. This C4C program is an accident waiting to happen. Check out Repofinder.com and see how big of a problem it is already.
Michael L. Hauschild| 8.3.09 @ 7:10PM
There are two groups of people who will benefit short term from the “cash for clunkers.” The first, and bless them for they are what we wish to be, are the affluent who purchase a car every year or with every whim. In other words, those of us who pay taxes, helped finance those who needed the money the least. The second group, those that usually don’t pay taxes are so balance sheet bereft they think spending five figures will save them four. What part of the housing bubble did you miss?
Tax revenues are projected to drop eighteen percent; those of us that are too poor to afford a new vehicle yet rich enough to pay taxes will be expected to fund an undeserving ride AND make that up the deficit. That second group, that spent money they didn’t have (again) will default. Bankers will again end up holding worthless paper, and the beltway dunderheads will again fall back on the old technique of franchised ejaculation, “stimulating” to buy votes.
We need a time machine to get us to 2010 right now.
Curtis| 8.3.09 @ 10:03PM
1. My parents could desperately use a new car, shame they're old car doesn't qual. I guess thats' what they get for being responsible back when they bought it. If only they'd bought a Hummer.
2. How many idiots are going to figure that if they buy a new guzzler now, they'll be able to trade it in under the next CARS program sometime in the future? One thing is for certain; They're never be a trade in program for hybrids with flat batteries, or econoboxes with bad motors.
3. How many of these purchasers are going to default on thier car loans? Five years from now, these new cars are going to start showing up in the repo lot, probably gutted by angry owners who couldn't afford the note.
Paul Boston| 8.3.09 @ 11:32PM
I need a new suit for work. Maybe the government could provide a 20% to Brooks Brothers for me to support the clothing industry and stimulate the economy?
I also own a number of old kitchen appliances and an aging lawn mower.......
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