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May 05, 2009

Cash for Clunkers

Posted by Gordon Smith

I am interrupting the great discussion of faith and corporate law to note this news item:

In an effort to help prop up the struggling U.S. auto industry, leading Democrats said Tuesday they had reached agreement on a proposal that would entitle consumers to vouchers worth as much as $4,500 to pay for new, more fuel-efficient vehicles, in exchange for the trade of older models. The so-called cash-for-clunkers program, which would be authorized for as long as one year, would provide for about one million new car or truck purchases.

A couple of weeks ago, I blogged about car shopping during the financial crisis, and we haven't purchased a car, yet. The problem isn't just that we couldn't come to terms on price, but also the fact that we were so disappointed in gas mileage of the mid-size sedans we evaluated. Most of them get something in the teens in city driving, according to the EPA. (We were looking at 6-cylinder vehicles because the 4-cylinder engine is pretty gutless in most mid-size sedans.) So if we sold our Suburban (an 8-cylinder!) and purchased a new car, we would make almost no progress at all for the environment or our wallet.

The problem here is pretty simple: engine technology has improved immensely over the past few decades, but modern cars are much, much heavier than older models. As a result, those engine improvements have essentially allowed us to run in place with regard to fuel economy. And, of course, the worst offenders are cars from Detroit.

We have now decided to start shopping for the next size down. We can live with a four-cylinder in a smaller car. Maybe even a hybrid. If my tax dollars are going to fund a cash-for-clunkers program, we may have a couple of deals in our future. (Under the current proposal, each person could obtain no more than one voucher in any three-year period ... so one for me and one for my wife, right?)

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Comments (7)

1. Posted by Jake on May 5, 2009 @ 19:01 | Permalink

No more than one "clunker" voucher in any three year period? The legislators are very "generous" indeed to spend our tax dollars that way. The three-year cycle would seem to encourage planned obsolescence, not to mention reward car buyers unduly for bad consumer decisions.

2. Posted by fedgovernor on May 5, 2009 @ 19:36 | Permalink

As I predicted ... the dealer refused to sell you the car at the price you wanted.

I wouldn't hold my breath waiting for a voucher. I don't think that legislation has a chance in hell of passing. And even if it does pass, the price of your new car will just rise by up to $4,500 so that the dealer captures that government handout.

You've entered a den of thieves, good sir.

As I warned you.

3. Posted by fedgovernor on May 5, 2009 @ 19:40 | Permalink

Here is a useful website for finding the right car - by searching according to gas mileage.

http://www.fueleconomy.gov/feg/byMPG.htm

There are lots of family sedans that get 25-30 MPG. I'd steer clear of hybrids owing to the fact that their claimed mileage is often far greater than actual mileage in real world use. Not to mention the exhorbitant cost.

A good mid-size 4-door family sedan that gets 25+ MPG can definitely be had; as long as you stay away from American car companies.

4. Posted by Gordon Smith on May 5, 2009 @ 21:06 | Permalink

Thanks for that link, fedgovernor. Very helpful.

By the way, we never made an offer on a car. The reference to "coming to terms on the price" was actually about us coming to terms with the fact that all of the cars we looked at were more expensive than we thought they were worth. It had nothing to do with any dealer's reluctance to accept cash. It had more to do with the fact that we were not really convinced that we wanted any of the cars we were testing.

5. Posted by Christine on May 5, 2009 @ 21:40 | Permalink

Highlander Hybrid. Always in the 20s. If you don't have to run the heater 9 months out of the year, probably mid-20s.

6. Posted by Joe Jones on May 5, 2009 @ 21:49 | Permalink

Germany put a similar program into effect earlier this year, and it was very successful in boosting car sales (according to the Economist a week or two ago), although it mainly helped sales of small, cheap cars.

7. Posted by arizona bankruptcy attorney on June 20, 2009 @ 11:03 | Permalink

We've already given billions to the car industry. This is a massive waste of money and hope those who support it also support the massive tax increase that is coming.

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