
(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:
- Can I just buy a junk car for a few hundred dollars and turn it in?
- If I turn in my SUV do I have to buy another SUV instead of something like a Prius?
- Can I turn in the car I keep parked in the alley for hauling junk twice a year?
- 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:
http://www.guardian.co.uk/commentisfree/2009/mar/10/car-scrappage-payments
http://greeninc.blogs.nytimes.com/2009/04/06/are-cash-for-clunkers-programs-green/
http://wheels.blogs.nytimes.com/2009/05/06/congress-close-on-cash-for-clunkers/
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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.
ReplyDeleteThis 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.