Friday, July 31, 2009

More Cash for Clunkers

The "cash for clunkers" program appears to be extremely popular. The LA Times reports:
"With surprising swiftness, the government's "cash for clunkers" program has burned through its $1-billion budget in less than a week as car buyers swarmed dealerships, and federal officials were scrambling late Thursday night to find more money to keep it going."
But the White House vows the popular program will continue. The NY Times reports:
"Robert Gibbs, a White House spokesman, said the administration was looking for ways to continue the popular new program, which offers $3,500 to $4,500 for people who trade in an old car for a new one with higher fuel economy."
Dave McDonald, who sells cars in Flint, has some real-world insight into the program.

This is generating a lot of excitement and moving some iron. So if the customer qualifies they get the $4500 credit, GM rebates, and in most cases a GM discount.


Here are some of the highlights or benefits as I see them.


1. A new car is sold

a. GM gets one sold

b. the dealer gets one sold

c. the salesperson makes money

d. if financed the financial institution makes money

e. the state makes money on sales tax

f. the state makes money on state fees

g. the gas station makes money because new ones get a full tank

h. the oil company makes money and its logistical team makes money


2. A clunker is taken in

a. the dealer makes $50 for disabling the engine ( supplies cost $30 )

b. the junk yard is paid by government to destroy motor/transmission

c. the junk yard parts out remaining parts

d. the junk yard sells the scrap metal


3. A clunker off the road

a. better emissions

b. better gas mileage

c. insurance company makes more money (naturally) now insuring newer vehicle

d. safer vehicle (less medical expenses in case of accident)


Someone needs to share some of this with the lawmakers who feel that GM, Ford, and Chrysler are not far reaching into the economy of the US. We haven't even taken a look at all the suppliers who sell parts, cleaners, solvents, etc. that make all of the above work.


Probably the one industry benefiting the most is the paper industry — the gov't LOVES paperwork. But a few trees are probably worth what this program is producing.

5 comments:

  1. just read an article on line and John McCain is whining that the government is bailing out the auto industry--again--he continues on by saying that two of the automakers are owned by the govt

    he failed to point out that the numerous other car companies-imports-to be specific-are also participating in the program.

    hey if the govt owns the companies why not support yourself.

    bush, mccain and the boys were quick to give the financial guys big bail outs but when the opportunity presents itself to help enormous amounts of regular hard working people mccain thinks it's a waste. he just doesn't get it....the financial guys never produced anything other than profit on paper...in this case a hunk of iron is transformed into transportation and so on.....it's funny how some people just don't grasp the reality of the situation

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  2. So, interestingly, they are now publishing some data on which cars are being traded in and which ones are being purchased. (source http://autos.yahoo.com/articles/autos_content_landing_pages/1036/top-cash-for-clunkers-trade-ins-and-new-cars/ )

    The Top Ten Cash for Clunkers Trade-Ins:
    1. 1998 Ford Explorer
    2. 1997 Ford Explorer
    3. 1996 Ford Explorer
    4. 1999 Ford Explorer
    5. Jeep Grand Cherokee
    6. Jeep Cherokee
    7. 1995 Ford Explorer
    8. 1994 Ford Explorer
    9. 1997 Ford Windstar
    10. 1999 Dodge Caravan



    The Top Ten Cash for Clunkers New Cars:
    1. Ford Focus
    2. Honda Civic
    3. Toyota Corolla
    4. Toyota Prius
    5. Ford Escape
    6. Toyota Camry
    7. Dodge Caliber
    8. Hyundai Elantra
    9. Honda Fit
    10. Chevy Cobalt


    Easy to see that the 'green' intent is VIVDLY reflected in this data. And based on the depleted program fundng, the 'pump taxpayer cash into the economy' effect is working. But benefiting US carmakers? Maybe not so much. And woe unto the guy who runs a shop keeping old Ford Explorers on the road.

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  3. Handing out taxpayer money to individuals turns out to be popular with the people getting the money. Who would have guessed?

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  4. No doubt, Rand. It shouldn't shock anyone that people are taking advantage of free money to buy a new car.

    I know many people are against the stimulus package, but it seems like if we're going to do it, this program is working better than some of the dubious rural road projects if the goal is quickly getting money into the economy. I have to say this would be having a much bigger impact on the U.S. economy if you had to buy an American car to get the cash. (Yes, I know that many of the "foreign" cars are made in the U.S., but a big chunk of the profits still goes back to the country of orign. So please, I beg of you, no comments claiming that buying a foreign car helps the U.S. just as much as buying an American car. We've covered this already and it's simply not true, says the guy who drives a 1990 Camry.)

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  5. It's also placing an effective floor on the price of used Ford Explorers, pricing many out of the market who could have previously afforded them. Not to mention wiping out a lot of small used car dealers who used to traffic in these politically incorrect vehicles. And wiping out a lot of charities' income, that used to benefit from donations of vehicles like that.

    All while simply borrowing demand from the future, and reducing sales months or years out from people who would otherwise have traded then. It is destroying wealth, just as when the Roosevelt administration poured out milk and slaughtered cows when people were going hungry, to maintain dairy prices.

    But other than that, hey, it's a great program.

    Want to know how I really feel?

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