I’m uncertain about this “cash for clunkers” program. Officially, it’s known as the Cash Allowance Rebate System (CARS). The idea behind it is to offer government cash incentives for old cars as trade-ins towards the purchase of new cars that are more fuel-efficient and produce less harmful emissions. Sounds great but when you consider the unintended consequences of such a program it’s not so appealing.
For example, in an article by Bob Cox of the Star-Telegram, Jeremy Anwyl, chief executive of Edmonds.com said projections over the next four months have consumers purchasing 250,000 automobiles by way of the CARS program. However, without such a program consumers normally would have traded in 200,000 cars for new vehicles within the same time period. Thereby the additional 50,000 cars bought by the one billion dollars in stimulus money have a subsidy price tag of 20,000 each. Ouch!
The Senate just passed legislation that will infuse the program with another $2 billion–the program’s first $1 billion was spent in about 10 days.
Then there’s the requirements of the CARS program for eligible trade-in and purchased vehicles. One word: CONFUSING. Seriously, the CARS official web site has FAQs that most people would find difficult to understand.
Another gripe I have is that the government set their goals for increased MPG far too low. An excerpt from the CARS site: “For passenger automobiles, the new vehicle must have a combined fuel economy value of at least 22 miles per gallon.” Is this really all that much better then the requirement of a combined 18 MPG or less for your clunker to be eligible as a trade-in? If one of the purported benefits from this program is to lessen our dependence on foreign oil, shouldn’t we be driving cars that get at least 25 combined MPG or better?
My gut tells me that the US auto industry, with their large inventory of trucks and SUVs, had a say in the diminished MPG factor.
Also, some in the auto salvage industry feel the “cash for clunkers” program will increase the price of used engines and parts for older cars because dealers who take the “clunker” trade-in must destroy the engine. This may be true but ideally the CARS program is designed to remove old vehicles from the road not preserve them.
Regardless of what I think about the caveats of the “cash for clunkers” program, it’s apparently working. Who would’ve thought just a few months ago that some in the the auto industry would be almost selling out of their inventory.
Dealers clearing their car lots sounds like a good thing but again Mr. Anwyl from Edmunds.com has a different take. He believes the average consumer is unaware that “cash for clunkers” is costing them money (tax dollars) and it’s artificially raising prices on new vehicles. If you’re not buying you’re still paying, he said.
Looking at it this way, I’m not so enthusiastic by the “good news” that I’ve been hearing lately about this government program.