'Cash for Clunkers' mostly a clunker
It took CNN Money a week to figure out what I told my friends here at CAPS about the Cash for Clunkers aka Cash for Trash bill when it was officially passed. Here's what I had to say on the subject on June 19th:
The reality of cash for clunkers
And here is what CNN Money published on the bill today:
'Cash for Clunkers' mostly a clunker - Most car shoppers will not benefit from the vehicle trade-in law
Here are a few quotes from the CNN article that confirm what we already knew:
If you think the new "Cash for Clunkers" law is going to help you buy a new car, you're probably wrong.
As it's written, the law will benefit few car shoppers and those who might actually benefit from it probably shouldn't be buying a new car to begin with.
Here's why it won't do most people much good: The government refund vouchers for $3,500 or $4,500 are in replacement of -- not in addition to -- the ordinary trade-in value of the vehicle, which in many instances will be worth more than the voucher...
If your trade-in is worth more than the voucher amount, you'd be better off just trading your car in as you ordinarily would and not even bothering with the "Cash for Clunkers" program. Even if your vehicle is worth a little less than that amount -- say, $3,000 instead of $3,500 -- you will be $500 better off under "Cash for Clunkers." But it you weren't ready to buy a car before, is $500 going to make the difference?
All of this raises a bigger question, too. If you're currently driving an old fuel hog that's worth less than $4,500, there's probably a reason.
"Most likely, you have the old car because you're either frugal by choice or because of your situation," said Jeff Bartlett who writes about auto buying for Consumer Reports...
For someone who's been driving an old, inefficient car on which they've made no payments in years, if ever, buying a new car would be a huge budget adjustment.
"How in the world are they going to step up and buy a new car with payments of $300 or $400 a month?" he said.
Why not simply sell or trade your car or truck for whatever it's worth and buy a more efficient used vehicle that's in good shape? That would save thousands over the cost of buying a new car, not the few hundred that a "Cash for Clunkers" voucher would save. Unfortunately, "Cash for Clunkers" vouchers cannot be claimed for used car purchases.
Gee this sounds awfully familiar. Check CAPS for breaking news first ;).