Five Things You Didn't Know About Cash For Clunkers
1)The red line represents Google searches for “NHTSA,” the blue line represents searches for “Clunker.” And we wonder why they weren’t ready.
2)The CARS program could cost up to $45,354 per vehicle. To get to that number Seeking Alpha starts with the Edmunds stat that 200,000 old cars are traded in every three months. Since CARS will grease the wheels for between 222,000 and 286,000 deals, the marginal increase is only in the 22k-86k sales range. At a cost of one billion dollars. Bottom line, the program should cost taxpayers a minimum of $11,628 per vehicle over the average. Add the fact that these marginal sales increases are likely pull-forwards, and C4C looks less and less like the “wild success” being attributed to it.
3)The German’s had to cap their C4C scheme at €5b. They thought €1.5b would do the trick. And even after the aproximately $7b was spent, the auto industry was “waiting on the bonus like a drug addict waits for the next shot,” according to one German politician.
4)Confirming C4C’s arrival as a genuine cultural phenomenon, there’s a new drink called “The Clunker.” Lemondrop.com accompanies the recipe with a rundown on how to discuss the CARS program at cocktail parties. Our advice is to just make the drink and read TTAC.
1 ounce Scotch
Shake all ingredients together. Garnish with a twist of lemon
5)Someday TTAC will cover something besides Cash For Clunkers.
More by Edward Niedermeyer
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" ... C4C just proves to me that new cars are overpriced by about $4,000." It seems that way, but you are incorrect. Massive manufacturer rebates were not getting the job of demand creation going because most people have become immune to rebates as a buying motivator. But, getting the hulking piece of crap out of the driveway in return for $4500 is a much more powerful motivator than just reducing the price of new vehicles by $4500 would be. The widely publicized short-term nature of the program also motivated a large number of people to get out of wait and see mode. If C4C becomes a long term government program, the stimulative advantage will wear out just like the manufacturer's rebate game burned out. To create buyer interest you need something new, novel and compelling. Use it too much and the effect wears off. "If I buy a million dollar home with no money down, am I a millionaire?" No, but if you have a new million dollar home built it will create a great deal of real work. Borrowing the money does in fact create the money. That is how fractional reserve banking works. The important thing is to not be lending money to people unless they have an extremely high probability of being able to repay it in a timely manner. Debt is neither good nor evil in and of itself. The relative goodness or badness of debt all depends upon the facts and circumstances around it.
Like I said, for most of these people, any debt will end up being short term. As for rebates, consumers expect them, and will wait until they appear in most cases before buying - hence the rebates at launch for the 2010 Taurus. Yes, the rebates are factored into the price, so you could say that the prices are too high to begin with. But remember what happened a few years ago when GM cut prices across the board to get MSRP closer to the actual transaction price, customers didn't buy it and rebates crept back up and are huge again. I can't think of another retailer that has made the no sale business plan - "everyday low price" other than Wal-Mart. And they still put stuff on clearance at end of season.
Ok, tell me this. When is someone going to wake up and realize that a huge percentage of the folks taking advantage of this program cannot afford the new car, don't qualify for a new car, and the financing is being dealt with just like the under-qualified mortgages that got us in the mess we are now in. What is the cost of all the repossessions in 12-18 months, and who is going to pay for THAT bailout? Wake up America, this is a very, very bad program for our economy.