Friday, July 31, 2009

Cash for Clunkers = Junk

I'm rather amused by the "Cash for Clunkers," or Car Allowance Rebate
System (CARS) program. It's already out of money, and representatives
from Michigan (on both sides of the aisle) are lobbying hard for more
funding. In case you are not familiar with this gem of an idea, CARS
provides consumers with vouchers worth thousands of dollars towards
the purchase of a new, more fuel efficient, car. It sounds good in
theory, right? Get the gas-guzzlers off the road, stimulate new car
sales, give the downtrodden American people a new toy, etc. But, like
most "incentive" programs, scratch beneath the surface and you will
find that this program is only designed to benefit one group: new car
manufacturers and dealers.

Basically, the program encourages consumers who have paid off their
car loans (because one must hold the title "free and clear" to
qualify) to hand over their perfectly functional vehicles (CARS
requires trade-ins to be in "drivable condition") for less than their
market value (trade-in value on the old car is limited to its scrap
value, since all "clunkers" must be destroyed). In return the consumer
gets to assume a new debt on a depreciating asset. Just what we should
all be doing in a down economy.

Then there's the "environmental" argument. CARS will help clean up the
air, and force American consumers to adopt greener transportation
technology. Well, there's a little phrase, popular in
conservation-minded circles, that goes "reduce, reuse, recycle." Note
that nowhere in this phrase are the words "buy new." Truth is, it's
far better for the environment to extend the life of manufactured
products. By scrapping all the trade-in vehicles, CARS is robbing the
marketplace of valuable used vehicles and components. This wastes
resources (just think of how much energy and raw materials are used in
the production of new cars), and robs consumers of affordable product.

And finally, what about all those small businesses who buy, sell and
repair used vehicles? There's an entire industry, called the
automotive aftermarket, which relies on used cars and car parts for
its bread and butter. The aftermarket industry employs thousands of
people, and is supported by a massive supply chain that includes
manufacturing and re-manufacturing, shipping and distribution and
retail infrastructure. Should all these businesses, and their
employees, wither on the vine so that the Big Three and their dealer
networks can blunder onward?

3 comments:

cosmicfriend said...

Great article. Just think what will happen when they take over health care. Gov't = waste.

Anonymous said...

All the whole program was was China is out of scrap iron and only willing to pay for scrap metal.
So, sc____ them... Keep yur clunker and avoid payments.

Anonymous said...

The other day driving home from work up 95 I saw a green "Choose Civility" magnet on the back of a SUV that has the words "MAKE ME" printed over top of it. I love it and want one....or 20!! Does anyone know where I can get them??