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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