Cash for Clunkers is a Waste of Government Time, Money

zzbronco

The House approved the “Cash for Clunkers” program yesterday, a $4 billion program that subsidizes new, fuel-efficient cars for people driving clunkers. CNN has more:

The measure would give consumers vouchers worth as much as $4,500 to turn in gas guzzlers and buy new cars that are more fuel efficient.

The House bill would go into effect within 30 days of enactment but it is not retroactive for new purchases made earlier this year.

Clunkers eligible for the program must get 18 miles per gallon, or less, in combined city and highway driving. A $3,500 subsidy can be used toward purchasing cars and vans that are more fuel efficient than the older clunkers by four miles per gallon. A $4,500 subsidy can be used toward purchasing cars and vans that are more fuel efficient than older cars by 10 miles per gallon.

However, cars that have not been insured for the past year or those that are older than 25 years are not eligible to be traded in for vouchers.

Autoblog adds:

The vehicle has to have been insured for the last year and there is no trade-in value beyond the voucher. The program is also available for leases. Dealers are required to provide proof that the vehicle (1984 MY or later) has been crushed or shredded, and the government estimates that around 25 million vehicles are eligible.

Not sure if you drive a clunker? Go to fueleconomy.gov and research your car’s official gas mileage.

Some people will welcome the chance to trade in their old cars, whose resale values have likely plummeted, for something smaller. But I doubt this bill affects enough people to significantly stimulate the auto industry. It’s a friendly gesture to a certain group of people, but little more.

If the government were serious about getting gas-guzzlers off the road in the short term, it would increase taxes on gas. But that wouldn’t be necessary. The market will naturally price out gas guzzlers once the price of oil increases again.

The government is wasting its time with this bill.

  • We have the same scheme here in the UK interestingly enough it was also recently introduced. The Goverment gives you £2000 to trade in a car over 10 yrs old and buy a new one.

    Its not really working and people are wondering why its okay to subsidise a business that places handouts over innovation

  • Of course this plan is a waste of money. But how else is the (partially) government owned car companies going to start selling their cars again. If you take a look at some of the people backing it *cough*UAW*cough* it all starts to make sense. And everything will start to look worse as people start off buying cheaper, foreign made cars instead of US brands. But, hey, that’s just the way our country is heading.

  • Liz

    BETTER IDEA – Offer a $4,500 credit to retrofit gas guzzlers to get an extra 10 mpg. Someone like the Motorhead Jonathan Goodwin whose retrofitting Neil Youngs Cadillac has experience in retrofitting SUV’s to get 60mpg – I’m sure he could come up with a $4,500/10 mpg upgrade. The technology exists but the Big Three Auto companies continually crush innovation because they are in bed with the oil companies. This approach would create jobs and avoid the toxic disposal of crushed SUV’s. Also, all the individuals who didn’t fall for the TV ads about SUV’s won’t feel like their getting a raw deal again.

  • J

    Cash for Clunkers is yet another optimistic endeavor that won’t live up to its intentions. Even before the House approved, it hurt sales in the auto industry: http://businesstrends.wordpress.com/2009/06/03/cash-for-clunkers-declining-consumer-confidence/

  • Jaxon

    My dad swears by the car buying process here: http://excarsalesman.typepad.com/

    I haven’t tried it yet, but I might because it looks good. I have an old civic that doesn’t qualify :(

  • Jordan

    I don’t qualify because my car already gets good gas mileage. My dad swears by the car buying process here: http://excarsalesman.typepad.com/ It is kind of similar.

    I haven’t tried it yet, but I might because it looks good.

    I have a feeling dealers are going to automatically increase prices because of the increased demand (artificial) for lower MPG cars. So the thousands of savings from this bill for consumers is not entirely accurate. The demand will increase prices and you’ll get a voucher from increased prices. I’m certain some markets you’ll come out even as if they never offered this voucher. It is poorly written legislation.

  • Andrias

    Well I’m not really sure if my car is a gas guzzler. I wish someone could tell me. It’s a 1999 escort and it’s small and white. I sure would like a new car.

  • To stimulate car sales, Congress only had to allow people who donate car to charity to claim the book value on their taxes. This way every car is eligible and there are no burdensome administrative costs.