Cash for Clunkers
It sounds like a great idea at first glance: the federal government giving people up to $4,500 to trade in an old, polluting car for a new car. Carmakers and dealers win by getting to sell more cars in a struggling market, and buyers win by getting a big subsidized discount. Best of all, we all win with the creation of a new federal agency!
Unless it doesn't work.
Let's go to our 1990s history for some parallels, specifically, the electric car. As an automotive journalist in Sacramento at the time, I was able to spend a week in three major manufacturer electric cars, and enjoyed them all. With the home charging station, ownership was easy, even pleasurable. The problem was not the cars, it was the demographic. Saturn, the company selling the EV1, was looking for people who were 1) environmentally-conscious, 2) earned more than $300K a year, and 3) could use a third car for a commute of less than 50 miles. Many of us might drop into one or two of these categories, but how many can satisfy all of them?
Herein lies the main problem with Cash-For-Clunkers: It does not meet real-world demographics. How many people trade in cars valued at $4,500 or less for a brand new one? Also, the car must get worse than 18 miles per gallon combined fuel economy. There are some, certainly, but probably not enough to call the program a success.
A recent Bloomberg article cites people in the government, carmaker, car seller, and car buyer species as excited about the program. The quoted car buyer turned in a 1994 Oldsmobile toward a Chevrolet Cobalt. The article omits the Oldsmobile model, but the Bravada, basically a Chevrolet S10 Blazer adaptation, is the only Olds that qualifies. The biggest boat in the fleet, the 98, gets too good of gas mileage to get you any green. Even the 1985 model 98 gets a check-cancelling 19 miles per gallon.
My family's 10 year-old mini-van meets all qualifications, barely meeting the new fuel economy requirement (it's too economical by the old standard), but even with the incentive, a new 6-seater vehicle is out of financial reach. The '85 Olds sounds good, though.
For those with longer financial arms, the used cars of those who frequently buy new cars will not have aged enough to consider unloading for $4,500, when a normal trade-in transaction would fetch much more.
Further, if the mpg difference between what you drop off and what you pick up is less than 10 mpg, your federal money drops to $3,500. For old truck-new truck transactions, the move-up standard is only 5 mpg.
Most morons cannot afford new cars, and anyone from moron-level up will sell a car valued more than $4,500 to a classified ad shopper.
For examples, a 1990 Ford Tempo, the official car of barefoot WalMart shoppers, gets an eligibility-eliminating 21 mpg. Shod Shoppers might take a hard look at their ten year-old Chevy Suburban, but the mpg difference is worth 3,500 government dollars; whereas Kelley Blue Book puts the baseball team-sized "clunker" at between 5,500 and 7,500 bucks. Involve the feds, lose two grand! Has kind of an IRS ring to it.
And no, you can't find some heap on the back lot of grandpa's farm and bring it in. Your trade-in must be running, insured and owned by you for at least a year prior, and finally, it must be destroyed upon trade-in. A lethal dose of sodium silicate must be administered to the engine. Really, that's the law.
NHTSA's own estimates are 12 additional vehicles per dealer, which is 250,000 estimated vehicles sold during the program divided by 19,700 dealers, adding "the impact...will most likely not be large enough to increase production by manufacturers."
My estimates are much lower, but we can agree that the federal government will hire 30 employees and over 200 contract employees to run this clunker of a euthanasia program.
