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The US Federal "Cash for Clunkers" Program


Ken H.

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5 years ago we were looking for a van (grandkids).

 

Wanted a Chrysler Town and Country because of the Stow and Go seats.

 

Made the deal. Then they asked how were we going to pay.

 

What do you have to offer for financing I ask.

 

0% and and additional $1,000 back from Chrysler Financial which I would NOT get if I didn't finance with Chrysler.

 

Still makes sense to pay cash?

 

If so, explain how.

 

Debt isn't just about money. If it were, and you had the cash to pay, it would make "financial" sense to keep your cash, invest it for a higher return, and take the financing offer.

 

But debt is a drug, and what they gave you that day is a dime bag to get you hooked. :grin:

 

It's not any big conspiracy where they targeted you in particular, hoping to hook you on debt. It's the system as a whole that lures people to buy things they don't need or can't afford, "because the money is so cheap."

 

How much money over the years did the big car companies make on their product vs. their financing arm? How about the same question for Sears and other stores?

 

Retail commerce isn't selling products as much as it is selling current happiness based on redefined "need" and pain-shifting toward the future.

 

There are some very disciplined people who would take that deal, invest the money, and come out ahead from a financial standpoint. But that's the exception--the rest of them buy more than what they need because there's an anesthetist on hand with the offers that this will be easy.

 

Why do all these stores offer you a big one-time discount if you'll sign up for their credit card and pay with that? There's only one reason: they know you'll buy more over time, on average, if it's easier to do so.

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steve.foote
You understand the time value of money.

 

At 0.9% interest rate being charged for an auto loan, does it make sense to pay cash for the car?

 

It ALWAYS makes sense to pay cash for a depreciating asset.

 

Zackly! And, Chris Olsen is right about people paying cash for vehicles - now and in the past. It's a very rare commodity, just ask any dealer.

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I know that every time I pay for something in the big box or dept stores, they ask if I want their card and will "give" me % off.

 

I laugh and ask if I have to pay the bill when it comes. They say yes. I say "Pay you now."

 

BTW Using the Discover card and paying off the balance each month also gets more money in my pocket. I guess Discover gets the money from fees they charge merchants? I know that for big ticket items it adds up fast. Just did that for a new washer and dryer and for a cruise to Nova Scotia. Bill will come next month and I will take money from savings (which would have been used if I paid "cash") and pay it off.

 

Friend of mine used the GM card for everything. Always paid the balance in full and got over $4,000 towards the purchase of his last car.

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steve.foote
I wonder if it would be as popular if they called it, "Your money for your neighbors clunker?"

 

Let's see, if we just gave the big three a tax break we could'a called it Reaganomics and talked about the "trickle-down economy" helping everyone. Since money is fungible, woulda' amounted to the same thing... your money going to the big three. But since we decided to:

 

1. See that some folks got new cars out of the deal.

2. Dealers got cut some action.

3. Clean up the air and reduce energy security issues

 

in addition to giving the automakers a boost, this is somehow wrong?

 

 

Actually, I sorta agree, I don't like anything that perpetuates the auto economy and forestalls the conversion of transportation to efficient and non-fossil fuel based modes. So, I was against it too. I also agree that it is an affront to fairness in some regard. Both approaches would have resulted in some degree of general economic stimulus, which after all was the ultimate driving (no pun intended) goal here, but I gotta think we're getting more bang for our buck with this program than we would have by doing it with tax cuts.

 

Jan, notwithstanding my obvious disagreement with your, um, intensive environmental views, I don’t see how you can equate the government handing out tax receipts to a third party with allowing the original income producer to keep more of what they earned. In the first case, the government takes money from one person then gives it to another person. In the second, the money is never taken in the first place. How is that the same?

 

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I wonder if it would be as popular if they called it, "Your money for your neighbors clunker?"

 

Let's see, if we just gave the big three a tax break we could'a called it Reaganomics and talked about the "trickle-down economy" helping everyone. Since money is fungible, woulda' amounted to the same thing... your money going to the big three. But since we decided to:

 

1. See that some folks got new cars out of the deal.

2. Dealers got cut some action.

3. Clean up the air and reduce energy security issues

 

in addition to giving the automakers a boost, this is somehow wrong?

 

 

Actually, I sorta agree, I don't like anything that perpetuates the auto economy and forestalls the conversion of transportation to efficient and non-fossil fuel based modes. So, I was against it too. I also agree that it is an affront to fairness in some regard. Both approaches would have resulted in some degree of general economic stimulus, which after all was the ultimate driving (no pun intended) goal here, but I gotta think we're getting more bang for our buck with this program than we would have by doing it with tax cuts.

 

Jan, notwithstanding my obvious disagreement with your, um, intensive environmental views, I don’t see how you can equate the government handing out tax receipts to a third party with allowing the original income producer to keep more of what they earned. In the first case, the government takes money from one person then gives it to another person. In the second, the money is never taken in the first place. How is that the same?

 

Steve,

 

You know the answer.

 

Jan

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I know that every time I pay for something in the big box or dept stores, they ask if I want their card and will "give" me % off.

 

I laugh and ask if I have to pay the bill when it comes. They say yes. I say "Pay you now."

 

BTW Using the Discover card and paying off the balance each month also gets more money in my pocket. I guess Discover gets the money from fees they charge merchants? I know that for big ticket items it adds up fast. Just did that for a new washer and dryer and for a cruise to Nova Scotia. Bill will come next month and I will take money from savings (which would have been used if I paid "cash") and pay it off.

 

Friend of mine used the GM card for everything. Always paid the balance in full and got over $4,000 towards the purchase of his last car.

 

Not really free. That money didn't pop out of thin air. You are getting some money back from the 2-3% that vendors are charged. Beyond that, any points you get a essentially a marketing incentive. They are banking on you eventually carrying a balance, or making a late payment and being able to charge fees.

 

So that $4000 incentive was apid for in one way or another. In part, your frind can thank those that are less responsible with their credit.

 

It's a little like insurance. If nobody ever crashed their car, or took more care to avoid having their hose burn down or home flood, or lived in locations that didn't have regular natural disasters, everyone's premiums would be lower. Health insurance would be a lot cheaper if we all were more active, ate better, banned smoking altogether, everyone wore helmet and used seatbelts.

 

 

There's NO free lunch in life. Somebody or everybody pays for something. Bill Gates can't make a million dolalrs without getting $1 for $1 million people. The only way money in created, is by increasing productivity as a whole and making more from less. Investment can create this, but on the other hand, some wealth is simply created by wealth redistribution. We've seen a lot of this over the last 2 decades.

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steve.foote
Steve,

 

You know the answer.

 

Jan

 

Well, yeah, it isn't the same. But, I'm interested in why you think it is.

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russell_bynum
I wonder if it would be as popular if they called it, "Your money for your neighbors clunker?"

 

Let's see, if we just gave the big three a tax break we could'a called it Reaganomics and talked about the "trickle-down economy" helping everyone. Since money is fungible, woulda' amounted to the same thing... your money going to the big three. But since we decided to:

 

1. See that some folks got new cars out of the deal.

2. Dealers got cut some action.

3. Clean up the air and reduce energy security issues

 

in addition to giving the automakers a boost, this is somehow wrong?

 

 

Actually, I sorta agree, I don't like anything that perpetuates the auto economy and forestalls the conversion of transportation to efficient and non-fossil fuel based modes. So, I was against it too. I also agree that it is an affront to fairness in some regard. Both approaches would have resulted in some degree of general economic stimulus, which after all was the ultimate driving (no pun intended) goal here, but I gotta think we're getting more bang for our buck with this program than we would have by doing it with tax cuts.

 

One benefit (?) of doing it with tax cuts would be that these old cars wouldn't have been junked. So...more used cars on the market means prices go down...which would enable struggling families who need transportation to be able to afford a car. This way, we've just generated scrap.

 

Note: I put a ? next to "benefit" because I realize that this may not help from a "cleaning up the environment" perspective nor the energy use perspective, but it seems to me that there's more potential benefit to the economy that way.

 

FWIW, I am against this program. I shouldn't have to pay for my neighbor to buy a new car.

 

One thing though....You said: "Actually, I sorta agree, I don't like anything that perpetuates the auto economy and forestalls the conversion of transportation to efficient and non-fossil fuel based modes."

 

You do realize that all four of your motorcycles run on fossil fuels, right?

 

Just checkin.

 

:grin:

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Paul Mihalka

"One benefit (?) of doing it with tax cuts would be that these old cars wouldn't have been junked. So...more used cars on the market means prices go down...which would enable struggling families who need transportation to be able to afford a car. This way, we've just generated scrap."

 

Scrapping a few old low mpg/high pollution cars should not change much the availability of older smaller cars which should still be affordable (and that is a relative term) which may be a better buy. I would think that many of the "trade-ins" are real clunkers that are better off the road.

 

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Scrapping a few old low mpg/high pollution cars should not change much the availability of older smaller cars which should still be affordable (and that is a relative term) which may be a better buy. I would think that many of the "trade-ins" are real clunkers that are better off the road.

 

I agree. We're talking abotu mostly full size SUV's or pick-ups... and ones worth less than $4500. Personally, if I need reliable transportation, I'd rather buy a small car for $4500 than a large SUV for $4500. If you need to carry for than 5 people, there are plenty of minivans in that price range as well. And we're only disposing of thsoe than get less than 18mpg. There's are plenty of minivans and other SUV's in that pricerange, but they get too good of mileage to qualify.

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You do realize that all six of your motorcycles run on fossil fuels, right?

 

Just checkin.

 

:grin:

 

Fixed it for ya! :-)

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russell_bynum

 

You do realize that all six of your motorcycles run on fossil fuels, right?

 

Just checkin.

 

:grin:

 

Fixed it for ya! :-)

 

:thumbsup:

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russell_bynum

Scrapping a few old low mpg/high pollution cars should not change much the availability of older smaller cars which should still be affordable (and that is a relative term) which may be a better buy. I would think that many of the "trade-ins" are real clunkers that are better off the road.

 

I agree. We're talking abotu mostly full size SUV's or pick-ups... and ones worth less than $4500. Personally, if I need reliable transportation, I'd rather buy a small car for $4500 than a large SUV for $4500. If you need to carry for than 5 people, there are plenty of minivans in that price range as well. And we're only disposing of thsoe than get less than 18mpg. There's are plenty of minivans and other SUV's in that pricerange, but they get too good of mileage to qualify.

 

Right...but in general...more used cars on the market means lower prices.

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I know that every time I pay for something in the big box or dept stores, they ask if I want their card and will "give" me % off.

 

I laugh and ask if I have to pay the bill when it comes. They say yes. I say "Pay you now."

 

BTW Using the Discover card and paying off the balance each month also gets more money in my pocket. I guess Discover gets the money from fees they charge merchants? I know that for big ticket items it adds up fast. Just did that for a new washer and dryer and for a cruise to Nova Scotia. Bill will come next month and I will take money from savings (which would have been used if I paid "cash") and pay it off.

 

Friend of mine used the GM card for everything. Always paid the balance in full and got over $4,000 towards the purchase of his last car.

 

Not really free. That money didn't pop out of thin air. You are getting some money back from the 2-3% that vendors are charged. Beyond that, any points you get a essentially a marketing incentive. They are banking on you eventually carrying a balance, or making a late payment and being able to charge fees.

 

So that $4000 incentive was apid for in one way or another. In part, your frind can thank those that are less responsible with their credit.

 

It's a little like insurance. If nobody ever crashed their car, or took more care to avoid having their hose burn down or home flood, or lived in locations that didn't have regular natural disasters, everyone's premiums would be lower. Health insurance would be a lot cheaper if we all were more active, ate better, banned smoking altogether, everyone wore helmet and used seatbelts.

 

 

There's NO free lunch in life. Somebody or everybody pays for something. Bill Gates can't make a million dolalrs without getting $1 for $1 million people. The only way money in created, is by increasing productivity as a whole and making more from less. Investment can create this, but on the other hand, some wealth is simply created by wealth redistribution. We've seen a lot of this over the last 2 decades.

 

Well let's look at it this way. The government was going to give someone the $4,500 for their clunker. My personal costs (via taxes) will not change if the money went to me or someone else. I think it was a great deal, for me, to take the money rather than have you have it.

 

Credit cards. Sure someone pays, but since I pay off the balance each month, it's not me that is paying. And since the credit card company will pay the "cash back" (not points) to someone, again I'm happy to take it.

 

As the old saying goes: "Grass, gas or ass, no one rides for free." :grin:

 

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steve.foote
It was fun while it lasted.....

 

Govt to suspend "cash for cars"

 

Update to the update. It looks like the on-again, off-again government gimmie program is back on-again. This time, our beloved congress is upping the ante by supplying $2 billion more of your money towards buying your neighbors clunkers.

 

House Votes to Add $2 Billion to ‘Cash for Clunkers’ (Update1)

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You do realize that all six of your motorcycles run on fossil fuels, right?

 

Just checkin.

 

:grin:

 

Fixed it for ya! :-)

 

 

Yeah, it's that old "do as I say, not as I do thing..." Sheesh...

 

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Paul Mihalka

Hey, give Jan a break! He may have six motorcycles but has only one butt - So he can ride only one polluter at a time! :)

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It was fun while it lasted.....

 

Govt to suspend "cash for cars"

 

Update to the update. It looks like the on-again, off-again government gimmie program is back on-again. This time, our beloved congress is upping the ante by supplying $2 billion more of your money towards buying your neighbors clunkers.

 

House Votes to Add $2 Billion to ‘Cash for Clunkers’ (Update1)

 

 

 

Ya mean a FED program is gonna cost 3 times as much as they thought it would............WHODATHUNKIT!!!!

 

 

:)

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Hey, give Jan a break! He may have six motorcycles but has only one butt - So he can ride only one polluter at a time! :)

 

Yep, and I'm down to just 3 of which I can only ride one at a time, but you don't see me advocating for the "end of the auto economy..." or whatever he called it.

 

Seems to be counter intuitive almost to the point of the "H" word...

 

Maybe he's just a closet capitalist who can't reconcile his feelings of guilt for being successful enough to have 6 motorcycles in the stable and he's suffering from some nature of cognitive dissonance...

 

Hmmm, flip of the coin I suppose to find the truth... :rofl::dopeslap::rofl::P

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It was fun while it lasted.....

 

Govt to suspend "cash for cars"

 

Update to the update. It looks like the on-again, off-again government gimmie program is back on-again. This time, our beloved congress is upping the ante by supplying $2 billion more of your money towards buying your neighbors clunkers.

 

House Votes to Add $2 Billion to ‘Cash for Clunkers’ (Update1)

House only. The Senate still has to vote, and I hope there will be some resistance, leading to some changes (like simplification) before reconciliation. But that's only a hope; realistically, I expect the Senate to roll. Sure wish I had bought Ford stock last November at $1.02 a share.

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steve.foote
Ya mean a FED program is gonna cost 3 times as much as they thought it would............WHODATHUNKIT!!!!

 

 

:)

 

Yeah, I know, it's hard to believe, what with the efficiency of government and all. :grin:

 

One of my favorite unsolved mysteries of government programs goes along this line: If spending a billion dollars of taxpayers money buying junk cars was a good idea, and adding two billion more is better, then wouldn't it be significantly more effective to add, say, 500 billion? Or even a trillion - or two?

 

I know, I know, some reading this might be thinking, "Steve, now you're just being ridiculous!" And I wouldn't disagree. Ridiculous is an excellent way to describe this whole silly program.

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It was fun while it lasted.....

 

Govt to suspend "cash for cars"

 

Update to the update. It looks like the on-again, off-again government gimmie program is back on-again. This time, our beloved congress is upping the ante by supplying $2 billion more of your money towards buying your neighbors clunkers.

 

House Votes to Add $2 Billion to ‘Cash for Clunkers’ (Update1)

 

 

 

Ya mean a FED program is gonna cost 3 times as much as they thought it would............WHODATHUNKIT!!!!

 

 

:)

 

Yes and no.

 

Three times the cost and three times the results. Not like they just tripled the amount each person could get.

 

 

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John Ranalletta

Ridiculous????

 

Who would ever think a government program is ridiculous?

 

It's not ridiculous, it's insane.

 

See

.

 

The end is nearer than even I thought.

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I'm not a math expert, but exactly what is one billion dollars divided by $4500? How many new cars did we taxpayers help buy? Something fishy if you can burn through one billion dollars in one week.

According to law, this is what happens to each clunker that is turned in to a dealer. It hurts to watch this..

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I'm not a math expert, but exactly what is one billion dollars divided by $4500? How many new cars did we taxpayers help buy? Something fishy if you can burn through one billion dollars in one week.

According to law, this is what happens to each clunker that is turned in to a dealer. It hurts to watch this..

 

The problem is, you are only thinking that the government is paying $4500 per clunker... that is only what is seen by the consumer... there are other expenses to take care of in the actual disposition of the clunker once the dealer takes possession of it...

 

I would not be surprised if the government is paying $10k per clunker or more... after all... didn't we pay well over $100 for a simple hammer at one time ???

 

Regards -

-Bob

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roadscholar

$3 billion at $3000./car is a million cars. New cars sold and used ones taken off the road and put in salvage yards. Bound to have an effect on the value of cars from 10 to 25 years old.

 

Those videos are sickening. Don't let Calvin see that first one. :cry::grin:

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Bob, you are absolutely right. Forgot there must be a clunker czar, a clunker cabinet member and thousands of bureaucratic clunker staffers to keep track of all the clunkers. Bet the final cost of each clunker is more like $45,000 each.

How about just scrapping cars for nothing and giving each person $45,000 to buy a new car outright?

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$3 billion at $3000./car is a million cars. New cars sold and used ones taken off the road and put in salvage yards. Bound to have an effect on the value of cars from 10 to 25 years old.

 

Those videos are sickening. Don't let Calvin see that first one. :cry::grin:

 

So about 9 million new vehicles are sold in the USA each year? That means one out of every nine new vehicles is a government subsidized vehicle purchase.

I want a refund.

 

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Lets_Play_Two

I wonder when the government will start programs for the appliance industries, the clothing industry, the entertainment industry, the electronics industries (anyone want a cash for computer clunkers) why have autos been singled out? The Chinese issued vouchers to citizens to buy home appliances and did this early on. It appears the Chinese economy is in early recovery. Maybe our government is watching the Chinese model. We did get all excited about the Japanese in the 70's when they were going to take over the economic world.

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John Ranalletta
why have autos been singled out
Are you being facetious? The government is

  • Doling out dollars for votes
  • Supporting government-owned car companies
  • Deliberately crashing our economic system to make all of us more dependent on handouts

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Lets_Play_Two
why have autos been singled out
Are you being facetious? The government is

  • Doling out dollars for votes
  • Supporting government-owned car companies
  • Deliberately crashing our economic system to make all of us more dependent on handouts

 

Yes, there is the conspiracy theory, but there would be more effective ways to destroy economy...just hike taxes, starting with payroll withholding. You are not restricted to GM cars in this cash for clunkers. I think the SEIU has more votes than the UAW so why aren't there hotel incentives, etc. Need something for the teachers, too.

 

I don't subscribe to the conspiracy theory, I just think the people advising the President have no idea what to do, and he is a fantastic speech maker, not an idea guy (leader). A life in the political arena isn't the best training for a real life crisis.

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steve.foote
It's not ridiculous, it's insane.

 

John, I can think of a whole list of adjectives to describe this latest hare-brained idea. Hey, that's one right there. :grin:

 

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steve.foote
$3 billion at $3000./car is a million cars. New cars sold and used ones taken off the road and put in salvage yards. Bound to have an effect on the value of cars from 10 to 25 years old.

 

Those videos are sickening. Don't let Calvin see that first one. :cry::grin:

 

Bill, if you take first watch, I'll take the second. Calvin is likely to show his DARK side if he ever sees those images. :eek:

 

You know, when I was 16, I would have given certain developing body parts for some of these cars they are needlessly destroying. I know when my kids reached driving age, each one of them drove such a vehicle because their mean ol' dad made them buy their first ride. What are kids to do now that we're taking the "cheap" car supply out of the mix?

 

This seems to be another clear example of READY - FIRE - AIM.

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John Ranalletta
but there would be more effective ways to destroy economy...just hike taxes, starting with payroll withholding.
Have you read the news lately? Search through the health care plan for the word "tax".

 

Every clunker traded in represents a $4,500 tax. Governments cannot spend money without collecting it back (plus overhead) in taxes.

 

US taxes will go up at least dollar for dollar spent on the clunker program.

 

Nonetheless, when did it ever make sense to destroy a working asset?

 

Anyone who believes this is a good program is uninformed.

 

 

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Lets_Play_Two
but there would be more effective ways to destroy economy...just hike taxes, starting with payroll withholding.
Have you read the news lately? Search through the health care plan for the word "tax".

 

Every clunker traded in represents a $4,500 tax. Governments cannot spend money without collecting it back (plus overhead) in taxes.

 

US taxes will go up at least dollar for dollar spent on the clunker program.

 

Nonetheless, when did it ever make sense to destroy a working asset?

 

Anyone who believes this is a good program is uninformed.

 

 

You are getting bent about the details and not the process. Did you read what I wrote or are you as myopic as our congress and senate? Trying to pick out individual problems with this program like "Nonetheless, when did it ever make sense to destroy a working asset?" Or talking about the indirect tax, is missing the forest for the trees. Of course we will be taxed, for generations!!! But if destroying the economy was the motivation there are quicker and more efficient ways to do that. Forget the conspiracy...this is a bunch of people who are flailing around trying to find a quick fix, or others trying to use this to create more social programs. I'll bet Barney Franks loves all the grousing about the "cash for clunkers" takes everyones mind off his stated attempt to convert the health care system to a single payer system.

 

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roadscholar

I'm ambivalent about the whole thing. On the one hand the big picture is fairly goofy looking. On the other, it's tempting not to grab some free money from Uncle Sam if you're eligible, and that's why they're destroying (some) perfectly good cars.

 

I'm considering getting rid of an actual clunker for a Smart Car (Simple, Mousy Alternative to Real Transportation), cutting edge or hedge cutter? :D Drove one yesterday, people in traffic were smiling or laughing, it's a mobile clown suit. Hey, it has the same P/W ratio as a '55 Porsche, now that's progress.

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steve.foote
I'm considering getting rid of an actual clunker for a Smart Car (Simple, Mousy Alternative to Real Transportation), cutting edge or hedge cutter? :D Drove one yesterday, people in traffic were smiling or laughing, it's a mobile clown suit. Hey, it has the same P/W ratio as a '55 Porsche, now that's progress.

 

LOL! You're killing me here, Bill. The mental pictures are priceless. :grin:

 

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John Ranalletta
But if destroying the economy was the motivation there are quicker and more efficient ways to do that.... others trying to use this to create more social programs.
You've stumbled onto the most efficient way; and, it's underway, full steam. You're right, in that it's not a conspiracy in a true sense; rather, it's a full scale, in-your-face offensive.
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But if destroying the economy was the motivation there are quicker and more efficient ways to do that.... others trying to use this to create more social programs.
You've stumbled onto the most efficient way; and, it's underway, full steam. You're right, in that it's not a conspiracy in a true sense; rather, it's a full scale, in-your-face offensive.

 

You guys are getting way off topic and crossing the no politics line. Lets reign it in to save the thread please.

 

Andy

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Nonetheless, when did it ever make sense to destroy a working asset?

 

 

 

 

ALL THE TIME!!! If I have a factory and have a 40 year old piece of process equipment that we're constantly repairing, that uses more energy and has higher scrap rates, it's ALWAYS makes sense to replace it. Expecically if it can get subsidised partially but strategic government programs.

 

The recipients of these programs can now enjoy a vehcule with lower operating costs and strategically, we can reduce energy consumption, and the auto industry nca put idle capacity ot work to bridge the slow time while they work toward long term capacity balances. The vehciles is question were likely to be scrapped eventually anyway. We only sped-up the process, and created an incentive ot buy a fuel efficient repalcement instead of another gas guzzler.

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Joe Frickin' Friday
The recipients of these programs can now enjoy a vehcule with lower operating costs...

 

Depreciation on a new car is, by far, the largest part of the cost of ownership of a vehicle. Add in the higher insurance costs on the newer/more valuable vehicle, too. There's a reason the IRS allows 55 cents per mile, despite the cost of gas being only 9-14 cents per mile (assuming 20-30 miles per gallon), and it's not cuz they're feeling generous. The people who have signed on for this program are most certainly experiencing much higher operating costs.

 

...and strategically, we can reduce energy consumption...

 

Um, yeah. 1 billion dollars, doled out at $4500 per clunker, works out to 222,222 cars. In a nation that owns 250 million cars, that's 0.09 percent of the fleet. Yes, a fraction of a percent. The rules require that the fuel economy difference between the vehicle you trade in and the vehicle you buy be at least 2 (for an SUV/truck), with the dollar incentive maxed out when you hit an improvement of 10 miles per gallon. I don't know how the actual realized improvements are working out, but let's assume an average improvement of 6 miles per gallon over an original MPG of ~18. So less than a tenth of a percent of the US private vehicle fleet experiences an MPG improvement of ~50%, which means the fleet as a whole has experienced an improvement of...

 

I'm sorry, it seems I've run out of zeroes. :grin:

 

 

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I'm not a math expert, but exactly what is one billion dollars divided by $4500? How many new cars did we taxpayers help buy? Something fishy if you can burn through one billion dollars in one week.

According to law, this is what happens to each clunker that is turned in to a dealer. It hurts to watch this..

 

The problem is, you are only thinking that the government is paying $4500 per clunker... that is only what is seen by the consumer... there are other expenses to take care of in the actual disposition of the clunker once the dealer takes possession of it...

 

I would not be surprised if the government is paying $10k per clunker or more... after all... didn't we pay well over $100 for a simple hammer at one time ???

 

Regards -

-Bob

There is an Associated Press article by Ken Thomas in my morning newspaper. In the article about the possible discontinuation of the Cash for Clunker program, Thomas writes, "the $1 billion has led to the sale of 250,000 new cars".

My calculator indicates that is $875,000,000 for cars surrendered at $3500 each and 1,125,000,000 if each car surrendered received $4500.

If Thomas is right, every penny from the CARS program is paying for the clunker and is not being used to pay for clunker administrative and bureaucratic costs.

Is Thomas right or are we being misled by the media?

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Lets_Play_Two
The recipients of these programs can now enjoy a vehcule with lower operating costs...

 

Depreciation on a new car is, by far, the largest part of the cost of ownership of a vehicle. Add in the higher insurance costs on the newer/more valuable vehicle, too. There's a reason the IRS allows 55 cents per mile, despite the cost of gas being only 9-14 cents per mile (assuming 20-30 miles per gallon), and it's not cuz they're feeling generous. The people who have signed on for this program are most certainly experiencing much higher operating costs.

 

...and strategically, we can reduce energy consumption...

 

Um, yeah. 1 billion dollars, doled out at $4500 per clunker, works out to 222,222 cars. In a nation that owns 250 million cars, that's 0.09 percent of the fleet. Yes, a fraction of a percent. The rules require that the fuel economy difference between the vehicle you trade in and the vehicle you buy be at least 2 (for an SUV/truck), with the dollar incentive maxed out when you hit an improvement of 10 miles per gallon. I don't know how the actual realized improvements are working out, but let's assume an average improvement of 6 miles per gallon over an original MPG of ~18. So less than a tenth of a percent of the US private vehicle fleet experiences an MPG improvement of ~50%, which means the fleet as a whole has experienced an improvement of...

 

I'm sorry, it seems I've run out of zeroes. :grin:

 

 

This is all the rhetoric that is used to sell this program to the public. Tag an oil use reduction to it and that becomes the excuse...lower emissions and better gas mileage. What this really is is another auto union jobs program. Chrysler is now apparently working overtime in some plants, as inventories go down, auto companies may recall furloughed employees, voters in Michigan will be singing the praises of the program. Nobody is doing the math on the overall impact...it is about "feel good". Of course if we can get an entire country of consumers to feel better and start spending money maybe this works! When you over think these things you take yourself out of the vast pool of "normal", potential voters. :)

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More rhetorical questions. I would surmise that many people buying these 250,000 cars on government subsidy are doing so impulsively and with little thought of the consequences of a large ticket purchase on a long term loan.

A few months down the road, it would be interesting to see how many of these new cars end up being repossessed and if the repossession rate is higher than people who purchased new vehicles without the government incentive. And if this is that case, does the federal government now own these repossessed cars? Do the taxpayers who helped buy these cars have any recourse to recover the losses from the deadbeat buyers?

Will the repossessed vehicles lead to another financial crisis in the USA..similar to the home mortgage meltdown?

BTW, since the car dealers are being inundated buy anxious subsidy buyers, are the deals they give less attractive financially since the demand is outpacing the supply?

When the buyers disappear after the program ends, will a new car buyer actually get a better new car deal by waiting?

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Lets_Play_Two
More rhetorical questions. I would surmise that many people buying these 250,000 cars on government subsidy are doing so impulsively and with little thought of the consequences of a large ticket purchase on a long term loan.

A few months down the road, it would be interesting to see how many of these new cars end up being repossessed and if the repossession rate is higher than people who purchased new vehicles without the government incentive. And if this is that case, does the federal government now own these repossessed cars? Do the taxpayers who helped buy these cars have any recourse to recover the losses from the deadbeat buyers?

Will the repossessed vehicles lead to another financial crisis in the USA..similar to the home mortgage meltdown?

BTW, since the car dealers are being inundated buy anxious subsidy buyers, are the deals they give less attractive financially since the demand is outpacing the supply?

When the buyers disappear after the program ends, will a new car buyer actually get a better new car deal by waiting?

 

I don't think you can assume that all buyers under this program are fools. I don't believe this program provided any special financing and those who financed had to meet what are obviously today's more stringent requirements.

 

Who knows from day to day what the best deals will be next month on a car purchase...or a motorcycle purchase for that matter. Presumably the clunkers being traded have little value thus the $3000-$4500 "trade-in" would disappear in the future. Wait to take your clunker in and I expect you get clunker value.

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Discounts from MSRP on new cars often come in the form of rebates, dealer discounts and of course cash for clunkers.

Since a CARS buyer is already getting $4500 of the price of a new car, the dealer can afford to be stingy on the "dealer discount" side of the car deal.

Once the CARS program disappears, steep dealer discounts resumes. It a wash whether you bring your clunker in as a trade or not.

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Discounts from MSRP on new cars often come in the form of rebates, dealer discounts and of course cash for clunkers.

Since a CARS buyer is already getting $4500 of the price of a new car, the dealer can afford to be stingy on the "dealer discount" side of the car deal.

Once the CARS program disappears, steep dealer discounts resumes. It a wash whether you bring your clunker in as a trade or not.

 

Given the MSRP cap on the new vehicle, there is no dealer discount that would equal the $4500 clunker allowance.

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