What Is The “Cash For Clunkers” Program Doing To The Car Industry?
Written by: Tom Sawyer
I’m sure you are somewhat familiar with the “Cash For Clunkers” program, known as CARS, but here are the program guidelines:
- To participate in the CARS program, you do not have to sign an agreement to pay back the dealer the CARS credit amount if the deal is rejected.
- You are required to leave your trade-in vehicle at the dealership and sign over the title to the trade-in vehicle at the time of the deal.
- Your vehicle must be less than 25 years old on the trade-in date
- The dealer must give you the new vehicle at the time of the deal.
- Only purchase or lease of new vehicles qualify.
- Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements).
- Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in.
- You don’t need a voucher, dealers will apply a credit at purchase.
- Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first ($2 billion dollars was recently added to the program).
- The program requires the scrapping of your eligible trade-in vehicle and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, minus $50 the dealer keeps for administrative fees, will be in addition to the rebate, and not in place of the rebate.
The program seems like a good idea that may actually hurt those it was designed to help. Many people just can’t afford to go out and buy a new car and not only does this program not allow them to buy a used car, it could make it harder for them to fix the car they currently own. Automobiles traded in under this program are destroyed which means one less car on the used car market and many less parts for used auto parts stores.
The bottom line, said Norman Wright, chief executive of Stadium Auto Parts in Denver, is that the program will most hurt the people who can least afford it: lower-income Americans.
“A lot of low-income people can’t afford any other type of car, and if there’s a shortage of those engines and their vehicles need one, then those people are going to have a hard time finding a recycled engine to get their car back up and running,” Wright said.
New car dealers are benefiting from this program, but auto parts dealers, used car dealers, lower-income buyers and even organizations who accept auto donations are eagerly anticipating the end to this program.
“I understand that people are getting a good deal in the car showroom, and I realize the car manufacturers need the help,” said Capt. Eric Wilkerson, administrator of the Salvation Army in Portland, Ore.
“God bless them,” he said. “But don’t forget about the Salvation Army. We need your help, too.”
For now, dealers and charities say they’re rolling in reverse while they anticipate the end of the program.
I’m of the opinion that this is another program, under the Obama administration, that will rub some people the wrong way and help others. It isn’t a permanent program so “non-participants” who aren’t in a good position right now have a light at the end of the tunnel.
I hope one of our readers has participated in the program to answer a question I have. Are dealers willing to negotiate on price or do they think the money coming from the government is all the buyer deserves to get taken off their desired price? According to some information I found on the Internet, some dealers/manufacturers are adding to the program. Additional incentives range from $500 to doubling the amount a buyer would receive under the CARS program. Think about this with me for a minute; if dealers can do this now, why couldn’t they lower the prices by up to $4,500 to sell cars before they (GM and Chrysler) took government money?
I think they could have but didn’t because they are greedy at their core.
Tags: CARS program hurts used car industry, cash for clunkers, Cash for clunkers hurting those who can't afford new cars, cash for clunkers reduces used auto parts
August 13th, 2009 at 11:29 pm
I’m out the door for work but two things I’d like to mention real quick. The auto recycling industry (Salvage Yards) will also be negatively impacted. The price of used cars and older vehicle car parts will be increasing which is hurting precisely who you spoke of, the people who simply can’t afford a new car. I’ll try and comment more in depth later.
August 14th, 2009 at 8:39 am
[...] our clunker title since …Cash for Clunkers – http://www.cashforclunkersfacts.com/|||What Is The “Cash For Clunkers” Program Doing To The Car Industry …I'm sure you are somewhat familiar with the “Cash For Clunkers” program, known as CARS, but [...]
August 14th, 2009 at 2:00 pm
“Additional incentives range from $500 to doubling the amount a buyer would receive under the CARS program.”
These are manufacturers rebates and probably were in place or planned before the program started. Different amount for different cars, not all rebates are equal. The rebate on a Focus or Malibu may be $500 and the rebate on a Town Car or Cadillac may be $4500. The inventory “days is stock” or turn over and the type of vehicle drives the amount of the rebate more than the inherent greed of the dealer and manufacturer.
However, this is just another example of the unintended consequence of implementing a program with out thinking it out. How many planners really thought about national supply of used parts and the people who buy them. I have heard that the program will cost us $6500 to $7000 per car because of the administration costs rather than just the $4500.
August 14th, 2009 at 2:53 pm
@Kent Smith – I don’t doubt that one bit. Our government is so inefficient with everything they do. A perfect example: I heard they paid 18 million dollars to revamp one of their main websites. In the private sector there’s a thing called pricing competition (Also known as common sense). I could have easily found them a company to do it for an eighth of that.
.-= Ryan Kazinec´s last blog ..Some Things First Time Home Buyers Should be Aware of – A House Inspection is Worth Every Penny =-.
August 14th, 2009 at 3:21 pm
Okay, time for my more drawn out response.
As some of you know, my wife and I are the owners of JealousBrother.com. I only mention that because we made a decision when we embarked on the journey of starting a website/company. We decided we could do without newer vehicles so we could afford the cost of running a major website. Personally I have no problem driving an older car and actually enjoy working on them. What I don’t enjoy is paying more for parts and having a difficult time finding parts. We have two vehicles, a 95 Honda Civic (36 mpg) with 282,000 miles on it and a 94 Honda Civic (35 mpg) with 341,000 miles on it.
When it comes to Honda’s there’s pretty much nothing I can’t fix. I just got done doing an engine swap on my Civic. I purchased a used Japanese engine from an engine importing company for $800. I have a reason for mentioning this. There are so many different companies and industries that are being affected by this waste of US tax dollars. There are unarguably fewer used/older vehicles on the road now due to the “Cash for Clunkers” program which will have a staggering affect on parts suppliers, used car lots, engine importers, auto recyclers, auto parts stores, and middle-moderate-low income households.
I also sit and think about not only the irony of the program but also the hypocrisy. The irony of course being that the group of people it’s going to affect the most is the low income. The hypocrisy being the destruction of perfectly good vehicles. I wonder what the average carbon footprint of manufacturing a vehicle is? Those vehicles could have supplied discount parts to thousands of low income people who go to auto recyclers like U-Pullit. To give an idea of the money you can save by purchasing parts from auto recyclers: Example: New Transmission may cost upwards of 3 to 4 thousand dollars. You can find used transmissions for anywhere between $150 to $350 at a recycler.
Yet another ridiculous result of this program is debt. A big part of America’s problem was Americans taking on too much debt, so what does the government do? They encourage people to get in debt up to their eyeballs (So tax payers go into debt to supply the tax credits and they go into debt to purchase the vehicles). It’s one thing to go into debt to start a business which has the potential to bring serious returns on the investment but it’s another thing entirely to go into debt on something that is going to do nothing but drop in value. I wonder how many of the people taking on these auto loans will end up in default due to job losses? So to sum it up, I’m not a fan of this program and hope to God they put it to an end sooner than later.
.-= Ryan Kazinec´s last blog ..Some Things First Time Home Buyers Should be Aware of – A House Inspection is Worth Every Penny =-.
August 16th, 2009 at 9:16 pm
In my case, my 14 year old Infinity J-30 quit on me last week after 99,000 miles. I’ll spend 800 bucks keeping it clunking along until my new car replacement comes in and I can clunk it all the way to the dealer. Perfect timing.
.-= Vigilante´s last blog ..The Moral Matrix: Beyond "Left" & "Right" =-.
August 21st, 2009 at 8:06 pm
I wish my country also doing the same program. To many old car in some part or states in my country. This kind of thing, good for the environment. Thank you for sharing this. See you around.
.-= lunaticg´s last blog ..World’s First Quad Metal Coin =-.
August 26th, 2009 at 6:35 am
Tom, I am just now reading this all the way through, been so busy! I like the last line and I can just see you saying it, “they are greedy at their core”! I agree!
A few months ago I went to a dealership and began the “browsing” process which quickly turned into the “pressure cooker” process. Good Lord! Even though this salesman was a Christian and kept continual Christian type stories flowing, I never ever lost sight of who he was and what he was doing. Because of circumstances and his histrionics, I didn’t buy and feel good about it however; I believe I am going to have to get me a car ASAP. Current loud noises and continuous nickel and dime trips to the car hospital are forcing me to take action and begin those monthly payments I had become accustomed to living without. I must say, my 1995 Toyota Camry, that I have had since 1998, has made me a happy woman! I have no sad song to sing about it. But… it still gets more than 18 miles per gallon. It still has a lot of good parts. I feel like I am one of those people who makes one dollar over the limit and can’t get help from a government program! I don’t make enough to be really comfortable but I make too much to get help! What I’m saying is, when I go to get a car, I probably won’t trade mine in anyway, but if I was going to, I couldn’t benefit from the program! Where is the program for me and my precious little car that still gets 30 or more miles to the gallon? And check this out; I don’t necessarily want a “new car”. I will settle for a nice, good, sturdy, pretty to look at, used car. I’m not ready to hold my breath as I drive off the lot and the last wheels rolls onto the street and my “new car” depreciates $2000. I will take pre-owned! I just want a deal! Are they going to give me a deal? Prolly not. I just gotta go buy a car and wheel and deal with the slimies!
August 26th, 2009 at 7:22 am
I have experienced a “Christian” at a place I’m doing business before and in my situation it was a case of “situational commonality.” In other words, I think this person was going to be anything the people he was selling to was. The same for your salesman; he may have only been a Chrisitian because he felt like it put the two of you on common ground. I don’t want to pass judgement on him, but I’m yet to find a car salesman who is really free of slime.
When you go look for a car, go in knowing that these dealers are giving people up to $4500 off cars in addition to the government program. Taking that much off a new car may make a new car ideal for you. Yes, I know the program might be over, but if they can make a deal like that last week, they can make a deal this week. Also, I’m not sure if you are affiliated with a bank that offers the service, but some banks will do the haggling for you ahead of time.
December 22nd, 2009 at 9:10 am
I have just scrapped my Honda Civic. What I wan to know is what happens to the Honda Car Parts once it is scrapped
February 23rd, 2010 at 12:39 pm
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.-= walk the coast´s last blog ..Walk coast =-.
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