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Cash For Clunkers - Another Governmental Disaster Brought To You By The Obama Administration
Another Bankrupt Program
Announcing another program In the glorious manner of bankrupt MediCare and the Katrina rescue, the federal government now brings you...
Cash for Clunkers!
Tow it in, push it in, drive it in! We'll give you $4500 of someone else's money!
A vehicle using 15 mpg driven 12,000 miles per year uses 800 gallons a year of
A vehicle using 25 mpg driven 12,000 miles per year uses 480 gallons a year.
Therefore, the average clunker transaction will reduce our
gasoline consumption by about 320 gallons per year.
About 700,000 vehicles were clunked; about 224 million gallons / year.
224 million gallons of gasoline is about 5
million barrels of oil.
5 million barrels of oil is about ¼ of one day's US consumption.
At $75 per barrel, 5 million barrels of oil costs about
Hmm... we spent $3
billion to save $350
1 billion is 1 thousand million... 3000 / .350 = 8.47
In 8.5 years we'll break even, assuming every clunker remained on the road that long. Yikes!
Intentionally Destroying Useful Property
Cars traded-in through the Cash For Clunkers program must, by law, be rendered undriveable and then sold to junk yards. Some dealers are using a product that causes the engine to seize before disposing of what has become nothing but an elaborate sculpture. Nothing from the so-called clunker can be stripped or reused. No tires, radios, interiors, mirrors, starters, alternators, headlights, spare change in the ash tray, or cup holders are spared. The good is shredded along with the bad.
The federal government has become a player in the used car business. Instead of regulating trade to the benefit of all and the exclusion of none, we are now part of a vehicular ponzi scheme in which our neighbors' income is confiscated to make our new car purchase a little less painful.
Billions of Dollars Spent to Destroy the Secondary Market
Assuming the maximum $4500 credit (someone else's money) is granted for each traded-in clunker, the initial 1 billion dollar budget will bring in 222,222 unloved vehicles. Almost a quarter of a million running vehicles will be artificially removed from the secondary market. Economic rules of supply and demand dictate that as supply goes down and demand remains the same, prices tend to increase.
As a result, the price of used cars will surge in the coming years. Consumers at the low end of the income scale will be priced out of vehicles that they otherwise would have been able to afford. Consumers who could afford a new car will benefit in the short run, but purchasers who historically select used cars will be punished by the Cash for Clunkers program.
A family who needs a used car for a new driver will find the price of a second or third car greatly inflated. The 5-10 year old vehicle typically purchased as an entry level college commuter is being shredded in the interest of politics.
Do the Math - You Still Need a Loan, Even with Cash for Clunkers Help
For example, consider the purchase of a new Toyota Prius under the Cash for Clunkers program. Assume an MSRP (Manufacturer's Suggested Retail Price) of $22,000. Subtract the $4500 'gift' from the government to get 17,500. Add 7% sales tax to bump it back up to $18725.
With no other down-payment, the shiny new hybrid can be financed at 6% for 48 months with a recurring payment of $310.33. Yikes. That'll finance a lot of gas and repairs to the clunker.
Therefore, the Cash for Clunkers program targets those consumers who are able to afford an additional $3723.96 per year in car payments (not to mention the additional insurance costs) but just aren't willing to pull the trigger without a little help from Uncle Sam.
Without the Cash for Clunkers spiff, the care would cost.$23540, with a monthly payment of $390.13. The Cash for Clunkers program has saved our consumer a whopping $79.80 per month.
The Car Repair Industry Gets Hammered
Adding a quarter of a million new cars to the market punishes the car repair industry immeasurably. Every neighborhood garage is looking down the barrel of a 3 year bubble of lost business. Clunkers need alternators, starters, tune ups, and all the other fixes that will now be warranty items. New car warranties are serviced at authorized dealerships. Yet again, the federal government has chosen winners and losers.
Other Programs for The Federal Government to Consider
Cash for Lunkers
Trade in your barnacle-encrusted gas-guzzling sea hag of a bass boat for a shiny new hybrid vessel. This program bails out (get it?) the struggling professional fishing industry, the chewing tobacco industry, and the throat cancer treatment industry.
Cash for Flunkers
Is your GPA below 'C' level? Trade it in for a shiny new score. The government will shred your old tired grades and help you purchase numbers that are fair and equitable. It was all the teacher's fault anyway, right?
Cash for Spelunkers
Lost in bowels of the Earth? Trade in your worn out caving equipment for shiny new helmets, ropes, cleats, belays, energy bars, and water bottles. Pray that the program doesn't run out of money before you get your new maps.
Cash for Clankers
Finally, a bail out for professional basketball teams. If your power forward shoots bricks, trade him in for a young, healthy, and subsidized replacement. If your center can't make a free throw, bench him in favor of an equal-opportunity player.
Cash for Clunkers may be over
The government interferes with the free market to choose winners and losers.
Not all used cars qualify for free money and not all new cars can be purchased within the program. Nor are the breakpoints are not based soley on fuel economy. Cash for Clunkers 'rules' exclude cars and trucks based on price as well as gas mileage.
The federal government is interfering with free market forces by favoring specific models of new vehicles. The feds are artificially modifying the secondary market by locking out some models and welcoming others. It's not about going green; it's a political ploy.