Cash for Clunkers: The good, the bad, and the ugly

The government'll pay ya' $4,500 to get this off the road.

I know what you’re thinking.  “Another ‘Cash for Clunkers’ article—barf!  If I have to hear about that again, I’m gonna’ lose it!”

Well, I don’t really blame you.  It seems like everywhere you go there’s more and more coverage on this crazy thing.  And unless you have a nearly worthless old gas hog rotting away in your backyard, it doesn’t even affect you.

Still, it makes the headlines for a reason.  It is an expensive program, funded by our tax dollars.  It has been effective up to a point.  But it has raised some eyebrows.

In case you aren’t up on the details, Cash for Clunkers is a program whereby you can trade your old “gas guzzler” in on a new, fuel efficient car, and the Federal Government will kick in up-to $4,500 toward the purchase.  You car has to be no older than 25-years-old, you have to have owned it for at least a year, and it has to get no better than 18-mpg combined to qualify for the maximum credit.  That mileage rating comes from a website that the government runs, so your actual mileage or window sticker or any other source is irrelevant.  Also, the car you’re buying has to get better mileage.

The good

There is no doubt that the program was popular.  And it makes sense if you were someone that could take advantage of it.  If I had an ’86 Parisienne sitting around in my driveway, you better believe I’d go trade it in on something.  $4,500 goes a long way toward the purchase price of a new Aveo, for example.  You could have that new car for next to nothing.  It’s a no-brainer—go for it.

It was also nice that they put the 25-year restriction on the vehicles that qualified as clunkers.  I know when this program was just being proposed, SEMA was hammering the pipeline with their ideas on how to preserve the integrity of the old car hobby.  It would have been a shame to see dad’s ’55 DeSoto go to the crusher.  Or even the ’76 Cutlass you inherited from grandma, for that matter.  I’m glad that they didn’t make it easy to destroy vintage cars and parts in the name of saving a few bucks on the bottom line of a new Hyundai.

The program was obviously a boon for participating car dealers.  Many saw more traffic than they had in years.  The rebate money was in addition to any factory rebates, dealership sales, or any of the other usual ploys used to sell new cars, so the metal was really moving.

And speaking of moving metal, selling more cars is naturally good for the auto manufacturers.  This is an industry in peril, and this shot in the arm is just what the doctor ordered to keep factories humming and keep the money flowing in for a change.

The Cash for Clunkers program was also sold for its environmental merits.  The idea is that if you replace older cars with newer, more efficient models, we’ll burn less fuel and produce a smaller carbon footprint.  Now, a lot of people were trading in second cars or vehicles that were barely roadworthy anyway, and despite the big talk, this is a very small number of vehicles in the big picture, but we’ll give it the benefit of the doubt and say it was worth something to the environment.

The bad

The most publicly criticized drawback to this program is that it prematurely ran out of money.  What exactly does that mean?  Well, the program was initially funded with $1-billion in tax dollars.  That was supposed to last through October, but it ran out within about four days.

The slant on this, of course, is that it was so wildly popular that running out of money proved that it was a monstrous success.  The reality is that it was poorly planned and not forecasted correctly. 

Why is that a problem?  If it runs out, it runs out, right?  Well, not exactly.  There were dealers all over the country that spent big bucks promoting this program.  People had contracts pending that nearly were voided by the disruption in the program.  Cars were being built, moved, and sold to meet the demand not only in the present, but throughout the life of the program.  If this program were to shut down early, it would have a ripple effect on all levels of the auto industry.

I’m a little sad about the number of old V8 cars and trucks that are being traded-in with this program.  It used to be that those were the best projects, the cars that gear heads went for when they were looking for cheap, fun things to work on and drive.  I know all’s fair when it comes to the environment, but there is something a little unsettling about dumping a corrosive solution down the oil filler of a perfectly good Chevy truck with the intention of destroying the engine for all time.

Another problem with this program was the government’s website, http://www.cars.gov/, which reported the fuel mileage ratings.  This is the only place that qualified fuel mileage information is posted.  No other sources are considered, so regardless of your personal experience, this is the last word on the “actual” fuel mileage (this is a combined city/highway average) of your car.

The idea is fine, because there really does need to be a fuel-mileage standard listed somewhere.  The problem was that early on in the program, hundreds, maybe thousands of cars that had been listed with 18-mpg on that website were mysteriously changed to 19-mpg the next day.  The difference between 18-mpg and 19-mpg is the difference between a $4,500 rebate and a $3,500 rebate, so anyone who signed a contract with a dealer before this change was implemented could be spending $1,000 more than they expected.  This change was supposedly brought about because of new changes in EPA guidelines.  But the timing of the change was somewhat suspect.

I was also forwarded an interesting video feed from Tony Pacheco, Kansas City Headlines Examiner.  In it, staunch conservative Glenn Beck noted that when you log into the http://www.cars.gov/ website, it makes you agree to the following disclaimer:

“Any or all uses of this system, any or all uses of this system and all files on this system may be intercepted, monitored, recorded, copied, audited, inspected, and disclosed to authorized CARS, DOT, and law enforcement personnel as well as all authorized officials of other agencies, both domestic and foreign. By using this system, the user consents to such interception, monitoring, recording, copying, auditing, inspecting and disclosure at the discretion of CARS or the DOT personnel.”

Now, I have to say, I’m not a big Glenn Beck fan.  Actually, I’m not a big fan of anyone that has an unwavering viewpoint, liberal or conservative, and can’t see the forest through the trees.  On the other hand, this story is starting to grow legs beyond its source.  Why would we want to allow anyone open access to our computer systems because we looked something up on the Cash for Clunkers website?  And why on earth would we allow anyone from any foreign agency to have access to our personal information?  I’m not really going to make a big issue about this here, but it may be a story to watch as time goes on.

The last thing I want to bring up under the heading of “The bad” is the idea that part of the reason our economy is in the sad condition it is in is because people bought things on credit that they couldn’t afford, and this program may actually be promoting that a little.  If someone is actually driving a total crap wagon every day, it might because they just want to, but it might be because they have to.  If someone really hasn’t got the financial wherewithal to sustain a car payment, they should stay away from the dealership no matter how attractive the offer.  We’re in a bit of a “Catch 22” here.  On one hand, we need people to buy things to stimulate industry and the overall economy.  On the other hand, the lack of personal responsibility contributes to a weak economy in the long-term.  This certainly isn’t the case with everyone who uses this program, but again, it is something to consider.

The ugly

The U.S. auto industry is in big trouble, and even though I do have a problem with my tax dollars funding something I didn’t ask for, I can accept it to a point to help bolster an industry full of people I know that make the things I love.

On the other hand, I absolutely resent my money going toward the purchase of foreign-branded vehicles.  It makes me sick to my stomach.  Can we still make the argument that something foreign is American because it is built here, or it doesn’t matter anymore in this global economy?  Can we really?

The American economy is directly tied to the success of the American auto industry.  The past few months have made that obvious. 

People are going to buy foreign cars.  There’s no way around it.  But I do not want to pay for them with tax dollars that I paid to the U.S. government.  If people are going to buy them, they are, but preferably not on my dime.

The dénouement

As of this article, the U.S. House has approved injecting another $2 billion into the Cash for Clunkers program to keep it going through October.  The Senate is balking at the extra funding, as the Republican senators claim that it was already so mismanaged it should be allowed to die. 

I agree to a point that it was mismanaged.  It seems like a half-baked program that was clearly not given due consideration on all levels.

On the other hand, the dealerships and auto manufacturers have a considerable investment in promotional efforts and increased product availability based on the sustained implementation of the program.  For an industry, and ultimately a group of people, that have already taken it to the chin, ending this program early would be a serious blow while they’re down. 

I may have had a different opinion when the thing started, but now that we’re here, I believe they need to continue to fund it to the bitter end.    We’re supposed to hear later on today whether or not it will be granted life or death.

However it turns out, the Cash for Clunkers program has proven to be an interesting experiment, and hopefully we’ve all learned some lessons that we can apply in the future to make our economy and our country stronger in the future.

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