The Downside of Cash for Clunkers

cash for clunkers

The other day I called on someone at the corporate offices of a large Wisconsin automotive group that owned a number of foreign and domestic car dealerships. The conversation got around to government control of the auto industry. Suddenly the person with whom I was meeting left the room and returned with a hundred-eighty-six page document that she had downloaded from the Internet. She dropped it on the table where we were sitting and identified it as the government regulations for dealers regarding the cash for clunkers program.

Cash for clunkers is a bill, written by congress, which is designed to remove as many gas guzzling older cars from the marketplace as quickly as possible. Here’s how it works: If you own an operating 1984 or newer vehicle that has been insured, registered to you for the past year, and gets a combined 18 miles per gallon or less, you can qualify. You can go to a website to discover whether your car gets less than 18 miles per gallon.

If you trade the gas guzzler in for a new car with a fuel efficiency rating that is four miles per gallon better, you can receive a $3500 voucher which will be applied directly to the new vehicle purchase. If the new vehicle has a fuel efficiency rating that is ten miles per gallon better, you can get a voucher for $4500.

Cash for clunkers seems like a good idea on the surface.

The plan is a boon for new car dealerships as consumers run to the showrooms to take advantage of the offer. Chrysler is even matching the subsidy with an equal amount of cash off the purchase of those cars that qualify for the program. Another industry that stands to benefit is the used auto parts market. Traded clunkers must be rendered inoperable and crushed, but not before the salvage yard strips off all the working used parts.

The cash for clunkers program will help beautify the highways. Some old cars are ugly, with hanging bumpers, rusted rocker panels and brandishing twenty-year-old bumper stickers. Eventually there will be no more rusted hulks lying at the bottom of ravines or out in farmer’s fields. Yeah, right . . .

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