The Cash for Clunkers program is stupid for a lot of reasons. Not only is it just another tax-payer bailout of the unions automakers, who can sell more cars at artificially depressed prices so they can keep the doors open. It also screws with the free-market (big surprise there) by pulling forward demand that isn’t there now, only to kill demand over the next 1-2 years. Killing off the clunkers also hurts the used car market, the spare parts market, and the auto repair business. If there aren’t any old cars to buy or fix, those guys are all out of a job.
But one of the most asinine parts of the plan is that they take old cars, many of which were being used as functional day-to-day transportation the day before, and destroy them. A perfectly good and useful machine destroyed for political reasons…
In a normal world, you take your trade-in to the dealer, he buys it from you, and then he resells it at the auto auction. It is the most efficient allocation of resources for the product. In this case, the government buys your trade-in and, instead of using it for its full value, it destroys the vehicle.
I know people will say that some of these cars were maintenance disasters to own and if the blue book is less that what someone will pay you for it, then there is no point in keeping it. But the Cash for Clunkers program requires that a working vehicle be destroyed. What about giving it to charity, or to your teenager, or to whomever deems the thing more useful than a $4,500 credit on a new car.
This will end up being like the housing mess but at a lower cost. I would be willing to bet that over 50% of those cars are being sold to people who really cant afford to buy but with a couple of thousand and a free handout from the government he or she now qualifies but really cant afford the payment (Think of the interest only home loans that got us into this mess in the first place)and will end up being repossessed
ReplyDeleteI couldn't agree more. This government is without a doubt completely out of control and out of touch with reality. It's like wathching teenagers argue why they should be allowed to do anything they want. Their rational makes no sense by audult standards. When will they be spanked and sent to their rooms?
ReplyDeleteThe implementation of Cash for clunkers was such a non-thought out moronic mess that good cas, many worth MORE than the new crap that would replace them, were destroyed, damaging the environment. I urg dealers to break the law and sell the so called clunkers anyways. Chances are govt inspectors dont have the resources to audit everyone.
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