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Posts Tagged ‘smart cars’

The Cold, Hard, and Depressing Facts about Cash-4-Clunkers

In Uncategorized on August 28, 2009 at 5:42 pm

THESE ARE FACTS. THINK FOR YOURSELF, QUESTION THEM, AND FORM YOUR OWN OPINION

The only way to judge something on the merits of factual evidence is to wait for the commotion to come to a stop and to look at the cold, hard facts as the dust settles. This blog post is about the Cash-4-Clunkers program, how the program played out, and the affects of the program. Keep in mind that THESE ARE JUST FACTS and it’s imperative that you FORM YOUR OWN OPINION and think for yourself. It’s not being able to think for ourselves that gets us in trouble.

What is Cash-4-Clunkers?

According to Edmunds.com, “The Cash for Clunkers 2009 program was signed into law by President Obama on June 24, 2009 with a goal of encouraging consumers to trade in older, less fuel-efficient vehicles for new vehicles that get better fuel economy by providing a credit of either $3,500 or $4,500. There are also credits available for some very large vans, SUVs and pickup trucks irrespective of their fuel economy.

The program divides cars, trucks, SUVs and vans into four categories, in most cases based on weight and length of their wheelbase. Vehicles that are traded in are to be destroyed, not resold, and the base manufacturer’s suggested retail price of the new replacement vehicle cannot exceed $45,000. Miles-per-gallon (mpg) figures set out below refer to the EPA’s published “combined” mpg.”

THESE ARE FACTS. THINK FOR YOURSELF, QUESTION THEM, AND FORM YOUR OWN OPINION

What Exactly Is A Clunker?

This website states that in order to be a clunker, the car must meet the following criteria:

1) Operational.
2) Rated at no more than 18 miles per gallon (m.p.g.) combined city/highway. (Check your car’s rating here.) (Editor’s update: The Environmental Protection Agency updated mileage ratings on July 24, affecting the eligibility of some models. These changes will only affect trade-ins made after that date.)
3) A 1984 model or newer.
4) Worth less than $4,500 – or in some cases, $3,500. (The program just bumps up the trade-in value of your car to one of those amounts; you don’t get extra).
5) Owned by you for at least a year (so you can’t go out and buy one at the junkyard and then turn around and trade it in).

The requirements for your new car are thus:

1) New. (It can be foreign or domestic).
2) Rated at 22 m.p.g. (combined) or better. If it’s a car and gets at least 10 m.p.g. better than your old vehicle, you get a $4,500 voucher; otherwise, it’s $3,500. For trucks, it’s more complicated. (Click here for details.)
3) Be worth no more than $45,000.
4) Bought between July 1 and Nov. 1 (but Congress has the option of extending the $1 billion program if it comes up with more money).

So we’re only really talking an increase in 4-5 MPG’s, since the highest you can have at first is 18 and the lowest you can get at the end is 22.

THESE ARE FACTS. THINK FOR YOURSELF, QUESTION THEM, AND FORM YOUR OWN OPINION

Let’s talk about the new cars now. Some quick facts from CashForClunkerFacts.com:

Top 10 New Vehicles Purchased

  1.  Toyota Corolla
  2.  Honda Civic
  3. Toyota Camry
  4. Ford Focus FWD
  5. Hyundai Elantra
  6. Nissan Versa
  7. Toyota Prius
  8. Honda Accord
  9. Honda Fit
  10. Ford Escape FWD

New Vehicles Manufacturers

  1. Toyota 19.4%
  2. General Motors 17.6%
  3. Ford 14.4%
  4. Honda 13.0%
  5. Nissan 8.7%
  6. Hyundai 7.2%
  7. Chrysler 6.6%
  8. Kia 4.3%
  9. Subaru 2.5%
  10. Mazda 2.4%
  11. Volkswagen 2.0%
  12. Suzuki 0.6%
  13. Mitsubishi 0.5%
  14. MINI 0.4%
  15. Smart 0.2%
  16. Volvo 0.1%
  17. All Other <0.1%

Top 10 Trade-in Vehicles

  1. Ford Explorer 4WD
  2. Ford F150 Pickup 2WD
  3. Jeep Grand Cherokee 4WD
  4. Ford Explorer 2WD
  5. Dodge Caravan/Grand Caravan 2WD
  6. Jeep Cherokee 4WD
  7. Chevrolet Blazer 4WD
  8. Chevrolet C1500 Pickup 2WD
  9. Ford F150 Pickup 4WD
  10. Ford Windstar FWD Van

These boil down to about 80% of the new cars being bought are from FOREIGN automakers but ALL of the top 10 trade-ins were from AMERICAN automakers. We basically traded our American trucks and cars for foreign cars.

Why would we do this?

“The U.S. government owns 61 percent of the new General Motors and 8 percent of Chrysler” (postandcourier.com)

Allow me to emphasize that:

“The U.S. government owns 61 percent of the new General Motors and 8 percent of Chrysler” (postandcourier.com)!

THESE ARE FACTS. THINK FOR YOURSELF, QUESTION THEM, AND FORM YOUR OWN OPINION

We also spent almost 3 BILLION DOLLARS to do this and what did we accomplish? In essence we gave business and revived the the Asian auto industry. Secondly, but not a single bit less important than that, is that we turned people who owned functioning cars to people who are now buying new cars. Our nation is in turmoil because of the credit crisis, and we’re giving out more credit!

Think about this: Most people who had clunkers probably didn’t have the best credit out there. If you were a successful person you might have a $25,000-$60,000 car. If you have a clunker, you probably work by the hour, and your credit could probably be better. Plus, the people with money and middle-management jobs were the ones hit the hardest when they lost their jobs and houses. I wonder how many executives who have an idea of how interest works participated in the cash for clunkers program?

What I’m trying to say is that we basically spent money we didn’t have in order to put our fellow Americans into a debt payment plan with all of the money and profits going to overseas automakers, all for just a difference of 5 miles per gallon!

And by spending money we didn’t have, we in essence lowered the value of our already depreciating dollar, thus making it so even if you didn’t cash in a clunker, you lost  part of whatever money you DID have because of the inflation rates!

Now why would the Government do this? One answer I came up with was because it’s a very clever way of artificially inflating the economic indicators, which gives the appearance that the economy bottomed out and is getting better. For example, Have you ever opened a Christmas present on Christmas Eve? If you have, you probably know what it’s like to have less than expected the next day, and all because you couldn’t delay your gratification. That’s what the auto industry did. They convinced everyone who was planning on getting a new car in the next year or two to get one with the C4C program. My question is…

Who’s going to be buying cars in the next 2-3 years, and with what money?

Yes, it spurred sales in the auto industry. But it also made it so consumer spending and retail purchases went down because people didn’t have much left over after they got a new car. It’s a depression and people think it’s OK to go out and buy a brand new car from another country. How is that helping America?

Another issue is the taxation of these transactions. You would assume that if you get a $25,000 car with the $4,500 rebate that you would pay taxes on the $20,500 right? That may not be true

As it turns out, each state determines whether to tax the clunker money. Pennsylvania doesn’t, for example, but Maryland applies its 6 percent excise tax to the incentive.

Besides the insane amount of paperwork and the Governments inability to reimburse the dealerships on time, this program only helped us get caught up in hype again without analyzing the facts.

THESE ARE FACTS. THINK FOR YOURSELF, QUESTION THEM, AND FORM YOUR OWN OPINION

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