Monday, August 10, 2009

The Clunker Crash

American Spectator has a nifty article today exposing the con of the Cash for Clunkers program. I've always believed that the program is a poor idea because it is an artificial manipulation of the normal economic cycle which always backfires on the other end.

Yet many are extolling the virtues of the program, celebrating the fact that dealers showrooms "are packed!" with people and "cars are selling!". Of course, the problem is that soon the $500 per month car payment will come due and not long after that, the repo man for some of these cars. Some of these buyers can afford the car and were probably waiting for the right incentive to leap, but a disproportional number, I'm betting, couldn't afford the purchase in the first place which is why they were still lumping to work in the old Toyota with 150,000 miles.

After the program runs its course, the artificial stimulation of new buyers will dry up the cobwebs will grow over the doors of the dealers.

The Specator article also addresses, of course, the fact that good, used parts to keep your car running will now disappear as the Clunkers are destroyed. Goodbye salvage yard. And the folks dependent on those used parts for their cars? Bus fare.

Read the whole thing; it's enlightening.


Red said...

I've understood that some places are reselling these "clunkers". I'm just waiting for the bubble to burst on this one too.

Dave Lucas said...

Well, wait a minute, Pat --- maybe we here in the US could learn something from our friends in CUBA --- just think --- we could get Cubans to come to the states where they could hold classes (for a small fee) and teach us the tricks they've learned to keep their 1940s and 1950s American cars on the road!

yukio ngaby said...

On Sunday, William Jacobson at Legal Insurrection also had an excellent post on the subject. Check it out.

Apparently, dealers are reducing the normal discounts off manufacturers suggested retail because of the tax dollar incentives, thus cars are actually selling at higher prices then before. Brilliant.

When will people learn that micro-management of the economy does not work? How many more countries have to demonstrate this? And do we have to be one of them?

G.R. said...


If I could go to Cuba and get a good conditioned 57 Chevy Bellaire, I would.
The problem I've heard about them is they don't float worth a damn.

Lisa said...

Red, I think the car reselling is happening now in Germany.,,4542972,00.html
Wouldn't surprise me to see it happen here too.

We own a 25 y/o Toyota.. surprise surprise.. it doesn't qualify as a clunker. what does? our 2004 Truck. Go figger. The more I think about it, the less likely I am to take $$ from the gov. anyhow. They can take their 4,500 and shove it where it will do the most good.

btw.. enjoy your blog. I'm in east texas, not far from Shvpt.. and loved your post on Natchitoches.. (ds went to college there a while).