Cash for Clunkers Round-up – A Waste for Taxpayers?
2. An economic analysis by Citigroup concluded that buyers received little or no financial benefit from the Cash for Clunkers programs because the $4500 government credit essentially replaced discounts and incentives that buyers would have received from the dealers themselves.
3. Foreign car companies did better than GM, Ford or Chrysler in sales of new cars under the clunkers program. Brilliant. The taxpayers own most of GM but our government feeds the competition.
4. The dramatic drop in sales in September also supports an argument that many economists have about Cash for Clunkers: The buyers were wealthier folks who would have purchased new cars anyway. We the taxpayers just helped them out. The less wealthy are still driving their clunkers because they couldn’t qualify for a car loan. That’s probably a good thing.
The hard truth is that Cash for Clunkers was primarily a multi-billion dollar payment transfer program in which the transferor was the U.S. Treasury and the transferees/beneficiaries were car dealers who were temporarily relieved of the burden of offering improved buyer discounts and incentives.
There was a presumed societal benefit in exchanging less fuel efficient vehicles for more fuel efficient vehicles. But buyers paid a big price for that benefit by swapping their paid-for vehicles for another car loan and new car depreciation hit. Now car dealers and manufacturers are hoping that Cash for Clunkers has jump-started a trend that will cause even more consumers to return to their borrow and spend ways. That would be unfortunate.
Wouldn’t it be refreshing if our national economy could purge itself of such dependency on new car sales?
Photo credit: kodiax 2