Today I've stumbled upon two pieces of information that make me proud of trying to sound the alarm of C4C -- but also a bit sad for those billions of taxpayer dollars.
1) How environmental, again?
The environmental bonafides of this program have long been under question. Even though the program requires buyers to update to a more efficient vehicle, it's much easier to qualify for a rebate if you're buying an SUV than a car. On the one hand, a small miles-per-gallon upgrade among hoggish SUVs will make a bigger net difference in emissions than a medium-sized MPG upgrade improvement among cars that are already fuel efficient. On the other hand, the program seemed stacked to encourage more SUV purchases.
The first figures from the government on C4C-purchased cars surprised me. It said that the most popular new cars were almost exclusively small ones like the Ford Focus and Toyota Prius. But via invaluable commenter "ed," I've stumbled upon this report from Edmunds.com, which placed two trucks in the top 10 most popular vehicle list and named that crossover SUV Ford Escape the number one purchase.
2) Suffer the charities.
I always suspected that C4C would be bad for used car dealerships (no surprise, it is), but I forgot to think about the charities. Sounds like I'm not the only one:
So look, not to be all nah-nah about it, because I understand that the government has a legitimate interest in not only boosting car sales but also perpetuating the idea that consumer demand is on the rebound, but I still think Cash for Clunkers is getting too much praise in the media. Also, consumer spending still stinks overall. In fact, non-auto consumer spending was down in July at a 0.6 percent clip after rising by 0.6 percent in June. Could Cash for Clunkers actually be hurting non-auto consumption? Meh, I won't go there. Not yet at least.Volunteers of America and other charities that receive tens of thousands of cars each year said such donations have quickly fallen up to 12 percent -- and fear a 25 percent drop eventually, or over $100 million -- as owners rush to trade gas guzzlers for new fuel-efficient models while federal rebates last.
It also probably suppressed sales prior to July. If you had an old bomb and needed a new car, would you be willing to wait a month or 4 to get a $4500 rebate vs the $200 the dealer might give you?
Cars.com actually had an article about one of their own staffers who did exactly that. I suspect that there are quite a few more that did the same thing. Hence slower than normal sales prior to July.
I don't know if the trucks are necessarily a terrible sign. First off, the Ford F-Series is the top selling car in the country. It was before clunkers. It will be after clunkers, and probably will continue to be until Rick Perry finally makes good on that promise to secede. Or $4 gas comes back again, and isn't just a hazy memory like a bad frat party. Meanwhile, the clunkers program apparently helped push the Ford Focus and the Toyota Prius into the top 10 in July. So while it didn't magically transform the U.S. car market, it may have tweaked it a little in a positive way.
Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
Henry
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www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info
The people most hurt by C4C are the lower-income people who would normally be buyers of serviceable used cars worth less than $4500. The government is outbidding them for these affordable vehicles and then destroying them -- driving up the prices of the used cars that remain in the market. It's effectively the automotive equivalent of the government outbidding low-income people for affordable older houses and then bulldozing them to stimulate the construction industry. Seen in this light, it's not just a stupid program, it's actually evil.
And, BTW, don't believe the lie that anything worth less than $4500 is a piece of junk almost ready for the scrap heap--my teenage kids drive a 10-year-old car that we picked up last year for $3K. It's in excellent shape and I expect it to run for many more years. Had we owned it longer, it might have been eligible for C4C, but it would have made me sick to hand it over to the government to be destroyed when it has so much useful life left -- for us and probably the next owner, too.
Of all the cars I've owned in my life, only a couple cost more than $4500 when I bought them (and not that much more), and certainly none were worth $4500 when I got rid of them...but most of them certainly had lots of useful life left in them even at that point. I know one car that I had I gave to a coworker who really needed a car right then, but couldn't afford to buy even the cheapest running junker at that point in her life. She was able to keep that car running for a number of years, which meant she was able to take a much better paying job that was farther away from her home, and eventually get back on her feet financially.
The thought that there are many cars out there that could be useful to someone in a similar situation, and that we are actually destroying these cars, and calling it a good thing has literally put me into shock. There is some kind of cognitive dissonance, and I just kind of refuse to believe this is actually going on. Never before have I hoped so much that the car dealerships or junkyards are somehow cheating the program, and managing to not really junk the engine.
"I understand that the government has a legitimate interest in not only boosting car sales but also perpetuating the idea that consumer demand is on the rebound..."
That's the problem, isn't it? How can the government do that with a straight face when we have a real unemployment rate of 12-15%? You can't pump a consumer-retail based economy if the consumers have no money. Eventually, people stop believing the hype, and reality comes crashing through the NYSE's front door.
I handle the vehicle donation program for over 100 nonprofits. I am not sure that the C4C program has really made a big dent in vehicle donations, since only 250,000 people have taken advantage of the program so far, and of those 250,000 perhaps 10% may have opted to donate that vehicle instead, so if you divide that number by the thousands of organizations that accept donations, everyone may have taken a small hit. However, if they had simply added some provision that allowed the people to donate the car, then everyone would have benefited. Instead, salvage yards and auction companies are making the money on the vehicles. If they were allowed to be donated, the charities would have made the $700 from the sale of the vehicle to salvage dealers.
More than the cash for clunkers program, the real hit to charities came when Senator Charles Grassley pushed through the bill that changed the tax law so that donors could only claim the sale price of the vehicle. That was truly a miscarriage of justice for the taxpayer and the charity.
Now, if someone donates a 1997 Honda in Minnesota and it is sold during a snow storm at an auction and it only brings in $500 that's what they can claim, but if their relative in California donates that same car, in the same condition and it is sold in the summer at a well-attended auction, it could bring in $1500. Same car, different tax donation. Not fair and it caused a HUGE decline in donations. Charles Grassley was responsible for hurting thousands of charities nationwide and shutting down hundreds of worthy programs, including shelters for the homeless. This is where the outcry should be.
As for the C4C program, dealers are advertising again and bringing people into their showrooms, which is never a bad thing for car donations.