Touch here for mobile friendly version

Thursday, May 7, 2009

Time for a new ride?

(photo credit Wen-YanKing via the Flickr Creative Commons license).

The Cash for Clunkers Agreement is a short-term attempt to stimulate consumer spending on new cars, nothing more, nothing less. It's a no-brainier from a political perspective because voters will support any program that will give them thousands of dollars to trade in a junker for a new car.

It is also another example of why you should not be waiting for politicians to fix global warming. The global warming impact of making a new car nullifies any savings from the marginally better gas mileage required to qualify (click to enlarge):

As with corn ethanol policy, they are about to make things worse again by taking two steps back for every step forward.

There are a lot of questions as to how it will work. Here are just a few:

  1. Can I just buy a junk car for a few hundred dollars and turn it in?
  2. If I turn in my SUV do I have to buy another SUV instead of something like a Prius?
  3. Can I turn in the car I keep parked in the alley for hauling junk twice a year?
  4. Will all cars turned in be scrapped, including cars that get much better mileage than others being turned in?

I don't know the answer to any of these questions but I don't think they matter. The government is just trying to get you to go buy a new car to clear the inventory on dealer lots. Dealers sure won't care about what you turn in. You could probably get $4000 for your grandma. But if the answer to question 2 is yes, then this piece of legislation has taken your usual inept government bungling to a whole new level.

For more on the topic:

Click here to see a list of my articles and to subscribe to future posts.

1 comment:

  1. The more I think about this the more questions I have. You would only do this if your clunker is worth a lot less than the voucher price. If your car was worth $3500 in the used car market and the voucher $4000, you only gain $500. Any of us are free to sell our clunkers on the used car market anytime we want and use the proceeds to buy a newer car.

    This bill will only be of interest to people who happen to own used cars worth a few hundred to possibly a few thousand dollars on the used car market who have the means to buy a new car. It is also a sure bet that new car prices will be rebounding in this short time frame, possibly eating up the voucher advantage.


Comments that are not respectful of other participants will be deleted, so don't waste your time on a post that will be canned. Feel free to post links to pertinent sources and to your own website as part of your comment. Spam disguised as a comment will also be deleted as will comments that consist primarily of copied and pasted words from other authors (plagiarized content).