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'Cash for Clunkers' mostly a clunker

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June 25, 2009 – Comments (14)

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 clunkerMost 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 ;).

Deej

14 Comments – Post Your Own

#1) On June 25, 2009 at 6:52 AM, WhiteHatBobby (< 20) wrote:

Cash for Clunkers is an attempt by the government to push people into buying the 2-seat microcars that will become the federal automobile standard under this environmentalist wacko administraiton.

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#2) On June 25, 2009 at 8:00 AM, jstegma (29.50) wrote:

It's just another idea that the Democrats pushed through before they thought it through.  There are quite a few of them and the administration is less than six months old.

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#3) On June 25, 2009 at 11:18 AM, hall9999 (99.55) wrote:

  True it takes the right situation for this program to be the right choice for someone.  I think I may be one of those that will benefit.  I have a 2004 Kia Sorento that gets about 17 mpg.  It's currently worth about $2500.  I was planning on trading it in within the next year for a hybrid.  If I get a Prius, which gets 50 mpg, I will save about $2000/yr on gas at current prices.  The extra $2000 from "Cash for Clunkers" knocks about $50/mo off the payment for a car I was considering anyway.

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#4) On June 25, 2009 at 11:29 AM, farmnut1985 (48.73) wrote:

They are doing the same thing with the cap and trade as the media will not talk about it until after it is passed. I don't understand why this is done other than to keep the public in the dark because they know if we had a say in it, it wouldn't happen.

Funny how I hear the best and most recent news on the Fool. Thanks for sharing Deej.

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#5) On June 25, 2009 at 11:55 AM, Imperial1964 (97.93) wrote:

The car I drive to work is an '85 Dodge diplomat with almost 250k miles and KBB.com says its value is "N/A".  I get a good laugh that value is not applicable to my car.

Anyway, a local dealer is advertizing new base-model Chevy Cobalts for $9,999, so it is awful tempting to buy a Cobalt for under $6,000.  The thing is, though, I like my full-size "clunker" about as much as a base-model Cobalt, so I don't think I'll be trading.  I'm not all that attached to my Dodge, but frankly I just don't like small cars.

Now, if they would let me trade it in for $4,500 off a new Harley Davidson, that is a different matter.  I'm going to double-check when all the details come out, but I don't think they let you trade a "clunker" in on a motorcycle. 

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#6) On June 25, 2009 at 12:01 PM, charlesblazer (99.02) wrote:

Cash for clunkers is the very tippity-tip of an iceberg of legislation that will follow over the next few decades, as long as the government owns GM.  It starts here, in the guise of populist environmentalism only tangentially related to promoting sales of new GM cars.  But it ends (many years from now) with a bill that simply slaps a 200% sales tax on everything that is not GM.  (see the Malaysian auto industry, for example)  It sounds ludicrous now, which is why we will take a hundred "sane" baby steps on our way to "crazy."

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#7) On June 25, 2009 at 12:41 PM, schuured (97.98) wrote:

So what keeps some schmo - who can't really afford a new car anyway - from deciding to buy an old gas guzzler from the local used dealer for a grand, and then trading that in for a new hybrid subcompact with the belief that he just jilted Uncle Sam out of $3500?  Only to find out six months later that he can't afford the payments and has to default.  It seems that this legislation is likely to hurt more people than it helps.  Surely, I cannot think of anything better to do with my tax dollars than encouraging more Americans to go into greater debt for something they do not need.

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#8) On June 25, 2009 at 12:52 PM, farmnut1985 (48.73) wrote:

schuured,  Have to have owned the vehicle for at least a year, but I agree that somone will try it.

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#9) On June 25, 2009 at 1:44 PM, outoffocus (23.59) wrote:

Tis the nature of our political system for the past 10 years.  Act (and spend) first, think second (if at all). Just think how much money the US could have saved if these stupid politicians would think first about a bill before they pass it.  I bet that number would be in the trillions.

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#10) On June 25, 2009 at 3:05 PM, TheClub55 (< 20) wrote:

How long do you have to have your used car for (I don't see a limit on cars.gov)????  If there is not a limit, it would be easy to buy a $500ish junker w/ poor mileage, license it, then trade it in a few weeks later for the rebate.  Then either sell your current car to a private party or keep it as a second car.

This could be one way someone in the middle class that needs a bailout could actually save $3500ish.

Too bad I have zero desire for a new car, I like the two I have that are paid off.

 

 

 

 

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#11) On June 25, 2009 at 3:05 PM, TheClub55 (< 20) wrote:

How long do you have to have your used car for (I don't see a limit on cars.gov)????  If there is not a limit, it would be easy to buy a $500ish junker w/ poor mileage, license it, then trade it in a few weeks later for the rebate.  Then either sell your current car to a private party or keep it as a second car.

This could be one way someone in the middle class that needs a bailout could actually save $3500ish.

Too bad I have zero desire for a new car, I like the two I have that are paid off.

 

 

 

 

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#12) On June 25, 2009 at 3:08 PM, wrparks (66.35) wrote:

You have to have owned the car for 12 months.  That solves the problem of gaming the system.  My question is, does the vehicle have to have tags on it?  What if you have the title to moderately functional junker, but it has no tags on it?  Do you qualify?

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#13) On June 25, 2009 at 5:24 PM, WillSurfForFood (88.01) wrote:

Yes it won't help a lot of people out but I would rather them pass a bill that helps too few than too many people out in this way. If it helps get some piece of trash vehicles that get less than 18mpg off the road it is a good thing. The only part I don't understand is the provision that to get $3500 voucher the new car must get 2mpg more. How is 2mpg more going to help, the minimum should be at least 5mpg.

If the money was on top of the trade in value these vehicles would just show up back on the road as they were sold to someone else, how does that help the environment? The idea is to scrap these vehicles.

One of the problems we face is we import about 10 million barrels of oil a day here in the US. That is about 700 million dollars a day we send to other countries to support our driving habits. If we can reduce this it would help environmentally and economically. Designing laws to achieve this isn't that easy and overall I support the bill even if it could be improved. For discloser reasons let me add this bill won't help me out at all.

 

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#14) On December 21, 2009 at 9:37 PM, BrandonPaulChevy (< 20) wrote:

You are indeed right. The one I sold was my old car which is having some problems on its air deflector. I benefited from this program but to tell you honestly, this program sucks..

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