My Cash for Your Clunkers
They are pathetically lame attempts to waste more of my money.
This is not going to work. Indeed, just the mention of it is likely depressing new car sales.
Why is it depressing new car sales? Because ignorant consumers who think the plan will actually benefit them are waiting on buying until the law goes into effect.
Why won’t cash for clunkers work?
To me, the big problem is that the cash for clunkers payment to the dealer replaces the trade-in value of the vehicle. I don’t think that most people understand that.
Assume that are driving an older truck or SUV with a value of $5000. You are eager to trade it in for a fuel efficient small car. The dealer will receive $4500 clunker cash toward what you owe. Hooray. But wait…..
You get nothing for your trade-in. Zero. That’s because the law requires the dealer to scrap (as in crush) your trade-in.
Is that a lousy deal or what? You’ve traded in a vehicle worth $5000 for a $4500 credit. That’s going to sell a lot of new cars.
Some of you are thinking about the real clunkers – the cars that are so old and beat up that they are worth $500, not $5000. Won’t this plan get those off the road? Not many.
First, how many people are actually driving around in $500 cars? (The bill stipulates that the trade-in has to have been registered and in use for the past year.)
Second, for those people who are driving around in $500 cars, how many are – in this economy – suddenly in a position to replace that clunker with a new car?
Do you think that people drive around in clunkers because they enjoy it? No. They do it because that’s all they can afford. Throwing taxpayer cash into the deal won’t change the fact that the clunker drivers still can’t afford the new car loan payments.
Finally, if you think that the dealers won’t adjust the bottom line selling prices of their new cars based on this plan, raise your hand.
I’m waiting for some hands.
The number of car dealers may be shrinking but the tactics the remaining dealers will use to extract the most cash from unsuspecting consumers – not changing.
The cash for clunkers plan definitely qualifies for this week’s fools of finance award.
Photo credit: Dave_7