Cash for Clunkers, Things to Consider…

While the Cash for Clunkers program included in the stimulus package passed earlier this year has caused new cars, albeit mostly foreign models, to roll off the show room floors by the thousands since it went into affect in July, not everyone is happy about the apparent success of the cash giveaway.

The program was designed to take inefficient older model vehicles off the road and replace them with more fuel efficient and more environmentally friendly new models. What it probably did not intend to do is rob automotive repair shops of their main business, repairs of older model cars and trucks. It also probably did not intend to create a windfall profit for salvage yards because only the engine of the Clunker has to be destroyed.

One auto repair shop owner gave an estimate to a customer to have a transmission repaired on a Chrysler minivan recently for $2,500. After some consideration the owner took the vehicle to a Hyundai dealer and traded it for a new car using the Cash for Clunkers program and received a $1,000 rebate on top of the $4,500 incentive from Uncle Sam. Now he has a new car with a 10 year 100,000 mile warranty and no transmission problem and still has his $2,500 in his pocket. The auto repair shop owner has an estimate that won’t ever turn into a repair ticket. If you multiply that by the number of Clunkers traded in the loss of business to auto repair shops is in deed staggering. That is not to say that these cars and trucks would not have eventually found there way to a dealer as a trade or to a junk yard on their own in due course, but the accelerated rate has created a virtual vacuum of business for repair shops everywhere.

Another consequence, although intended in an effort to become a more Green America, is that there are fewer low priced vehicles available for people who are not in the position to either purchase a new car or finance a newer model used car. These cars are generally cars purchased by poor families, second cars for middle class families, and cars used by college students. With the number of cars taken off the road with the Cash for Clunkers program people in lower socioeconomic situations are not going to be able to find affordable transportation.

Lastly, this program amounts to a tax rebate that many families are not able to take advantage of because of their credit worthiness or general financial situation. If they can’t get a new car financed or can’t make payments even if they could, the down payment doesn’t really matter. They could better use the money to pay for rent, health insurance premiums, or maybe even to put food on the table. They are stuck driving their Clunkers with poor gas mileage and paying higher gas prices.

This is just another reason that Members of Congress have to read bills before they are voted on so that reasonable debate can take place and public input can be given before they are signed into law. I’m all for selling new cars, but at what cost and to whom? Let’s think before we pay next time, how about it Congress?