Insight on the Cash for Clunkers…

I’ve missed three days of work and counting thanks to the flu. Rather than feeling better, I feel worse. My sister lovingly said, ‘I think that’s a sign of the swine flu.’

Thanks. Now I’ve got THAT to worry about.

In all my sitting at home time – most of which is spent in complete misery – I am able to squint open my eyes and read some of the daily news. I stumbled upon this headlining article at AOL…

http://autos.aol.com/article/cash-for-clunkers-greenwash

I found two quotes particularly eye opening…

‘Three revealing line items in a separate CNW survey noted that the drain on the family coffers would be offset by reducing the pay-down of credit card debt, deferring home improvement and removing money from non-targeted savings.’

and

‘Other critics groused that Cars for Clunkers took $2.8 billion from the general roster of 300 million citizens and handed it tax-free to a small group of 700,000 citizens.’

What are your thoughts?

Posted by Beks on September 24, 2009 at 5:00 AM in Credit Cards, General Personal Finance, Good Info | 12 Comments »
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  1. jaye responded:
    Posted: September 24th, 2009 at 7:57 am

    This article brought up some interesting points, however, I can’t help but wonder why his argument seems so one-sided. He portrays the average american as a moron, unable to make intelligent choices. His references to Hamburger Helper and driving to Disney combined with his haughty tone make me think that he assumes everyone who took advantage of the C4C plan was poor and uneducated.

    Haven’t many of us reduced our mileage regardless of our particular car’s MPG if we needed to save money? Why jump to a conclusion that everyone’s IQ goes down the toilet upon buying a greener vehicle, based on “another piece of research”? If people want to drive less, they will. Or perhaps they might be driving farther because they can now safely expand the area in which they can work? Basic safety for these people and their children…that’s another issue…but I won’t even get into that.

    Same goes for taking on debt. It’s a choice. Why assume everyone who stepped up for the C4C didn’t know what they were getting into? That they all eat Hamburger Helper and don’t understand what they’ve done until it’s too late? Why assume that a “clearheaded head of a household able to do basic arithmetic” wouldn’t have thought through numbers before buying a car?

    The author doesn’t take into consideration how much it costs (and not just to the environment) to keep a “clunker” on the road. My experience tells me that keeping an old car healthy and safe can cost quite a bit (often all at once), therefore making one wonder if it wouldn’t be a safer bet financially to have scheduled payments of, say $200/month, rather than be surprised by a $2500 bill. In fact, with a ‘99 Civic and a ‘00 Odyssey, my husband and I have that discussion rather often.

    Maybe it was just his tone that set me off. Am I wrong? Or was his attitude a little holier-than-thou? One-dimensional and, at the same time, smug?

    Maybe I’m just grumpy.

  2. John DeFlumeri Jr responded:
    Posted: September 24th, 2009 at 8:46 am

    It was just a gimmick to move car sales. Foreign carmakers made most of the money, it would have been better if it applied to non-imports first.

  3. Dara responded:
    Posted: September 24th, 2009 at 10:01 am

    I think that if you truly have a clunker that wouldn’t make it a few more months or a year, it was a good way to save money and buy a new car. However, you can also just buy a used car without many miles on it.

    I know people who participated in this, and it really made a difference for their families to have a reliable car, with better gas mileage that will not need to be repaired.

  4. David@DINKS Finance responded:
    Posted: September 24th, 2009 at 12:29 pm

    “Other critics groused that Cars for Clunkers took $2.8 billion from the general roster of 300 million citizens and handed it tax-free to a small group of 700,000 citizens.”

    It’s a total and absolute redistribution of wealth. There was a lucky group who had clunkers and bought a new car partially with taxpayer money. It’s absolutley ridiculous that the government would pick one tiny group of consumers (those with clunkers who could buy a new car at a set time) and benefit a specific industry. Other industries are hurting, aren’t they?

    As Ron Paul says, you don’t create wealth by taking old cars and destroying them. It’s illogical.

  5. John responded:
    Posted: September 24th, 2009 at 11:52 pm

    Although, I think the cash for clunkers program was a good thing to give people a chance to get a reliable car and help the auto makers a bit. Some of them are hiring people back and re-opening factories because of it. I do on the other hand feel this is short lived and things will quickly revert back to the way they recently were. No matter what bail out plan they offer someone will not be happy. When the first $700 billion bail out rolled out there was a provision to give tax breaks to manufacturers of wooden arrows. How many manufacturers are there for wooden arrows? Is anyone happy about that? The financial elite just play with our money and our lives. We never get into the fine print. The best plan was the guy who thought every tax paying American should get $425,000. That would equate to $85 billion. The same amount given to bail out AIG. It would have sky rocketed the economy and saved billions. What would you have done with $425,000? I am looking forward to seeing Capitalism: A Love Story to see what Mr Moore finds out behind the scenes that we probably new nothing about.

  6. David@DINKS Finance responded:
    Posted: September 25th, 2009 at 11:34 am

    In response to John’s statement: ” I am looking forward to seeing Capitalism: A Love Story to see what Mr Moore finds out behind the scenes that we probably new nothing about.”

    I find this documentary pretty laughable. The thing about Moore is he attacks capitalism. In the previews you see him going to AIG and asking where “our” money is. He should be railing on government, not that company! Anyone who supports capitalism is against government intervention – government gave them our money, not capitalism! Government decided they were too big to fail – they wouldn’t exist if capitalism was free to work!

    I haven’t seen the move, but it seems like Moore should have checked his premises. He seems to be blaming the bailouts, the propping up of failed companies, the constant government intervention on capitalism DESPITE the fact that capitalism would not have done ANY of this!

    It’s amazing the misplaced blame we see coming from Moore.

  7. Karen responded:
    Posted: September 25th, 2009 at 3:52 pm

    Cash for clunkers is a program to get high mileage cars that pollute our environment off the road. It was not really anything more than that, although it did help some people who otherwise couldn’t afford a new car. Those of us who believe that the air we breathe needs to be clear and that for almost a decade companies and individuals have been doing grave danger to the environment are very pleased that things are beginning to change around. We owe it to our children and grandchildren to live respectfully on this planet. Now, if we could just get people to be nice to one another…..

  8. Mary responded:
    Posted: September 25th, 2009 at 7:06 pm

    I saw nothing positive in it.

    1) I’d have liked to have seen it apply to ONLY AMERICAN MADE cars. Oh, wait…are any cars truly made in America anymore? There is a list of 75 cars here: http://www.howtobuyamerican.com/content/db/b-db-autos.shtml

    I would like to know how many of these cars were eligible for the program. I will need to research that further.

    2) It took a bunch of cars off the road that lower income people might have been able to afford as used cars. I’m driving a 10-yr old Chevy Tracker right now that only has 120,000 miles on it, a good engine, and a fair body (it was good til some numskull rear-ended me doing 40 mph in June, now it’s just fair.) It’s reliable – I’ve had it in a shop just TWICE since I brought it home July 5th, 2000. Why on earth would I want to trade it in for a new car? Yet, when it dies, I’ll be looking to replace it with a used car from the pool that just got smaller because what I can afford is what this program targeted.

    3) You have to have had great credit for this program. Mine right now, not so good. I’ve been the struggling owner of a children’s consignment shop since 2004, when I was laid off from a $70k/yr engineering job. I’m in an area of 15% unemployment so it’s been darn near impossible to find an engineering “day job” in my area (I have friends that volunteer to run the shop while I work but I lost my last job 18 months ago and haven’t found anything that pays well enough for me to work 40 hrs a week at it, plus another 30-40 at the shop nights and weekends. So, late and missed payments have caused my credit to tank and a failing business has meant not enough income to afford a new car.

    Not one person I know used the program. Can a lot of people say that or am I unique?

  9. Mary responded:
    Posted: September 25th, 2009 at 7:12 pm

    Oh, and my last car was a USED 1984(?) Mazda 626 that was truly Made in America (my stepmother bought it just for that reason) and I drove it for 3 years from Grand Rapids to Lansing while I commuted to college every day. When it finally died – on my way home from work the rear wheel bearings burned up and it was riding on the tires, such a sad day – it had just over 248,000 miles on it.

    Just before I bought it from my parents a tree fell on it and dented the roof. The insurance company totaled it and paid them the value of it. Then I paid them $1,000 for it and drove it more than 3 more years. At times I had the front window taped in place because it kept sliding down on its own, but that was the 2nd most reliable car I’ve ever owned. And it didnt’ look all that bad, either.

    Just trying to show that you don’t need a brand new, $20k or $30k car to have reliable, affordable transportation.

  10. Bobby responded:
    Posted: September 25th, 2009 at 8:37 pm

    The logic I didn’t understand is why dismantle the old cars? Seems there could have been a better use for them. Otherwise, the economic logic behind C4C seemed to makes sense. Put more money in the economy in a way that benefits us all eventually.

  11. Beks responded:
    Posted: September 25th, 2009 at 10:54 pm

    Mary – my sister LOVED her Mazda too. It’s the main reason I bought one.

    Bobby – I agree.

  12. David@DINKS Finance responded:
    Posted: September 28th, 2009 at 10:30 am

    @Bobby

    “The logic I didn’t understand is why dismantle the old cars? Seems there could have been a better use for them. Otherwise, the economic logic behind C4C seemed to makes sense. Put more money in the economy in a way that benefits us all eventually.”

    The money was already in the economy. The money the government spends comes from the private market, does it not? And if it didn’t and they made it out of thin air (i.e. printed it) that means every dollar already in circulation is worth less. How does it make sense to force people to spend money on a certain sector of the economy? Plus, we are forcing people to spend money so others can benefit. I pay taxes, yet I didn’t take part in the c4c program. Yet some of my tax dollars went towards that.

    If anything we need to promote savings right now, and cash for clunkers goes by the rationale that we need to spend more and more and more to spur the economy. We spent too much money, most of what we don’t owe, and that is why we are retracting. We need to promote savings, not spending, and ESPECIALLY not forced redistributive spending on one market.

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