Thanks a lot Cash For Clunkers..You just cost us more money

[CoolBreeze]

Did anyone NOT see this coming?


If buying a used car is among your cost-cutting measures...be prepared to pay up to 30-percent more than you did last year. It is a simple case of supply and demand. Trouble is...there are fewer used cars.
The cash-for-clunkers program took a bunch off the market. Plus, Edmunds Senior Editor Bill Visnick says 5-million fewer new cars were sold last year...which pares down the used car supply even more.

The used car models jumping the most in price include mid-size SUVs and mini-vans designed to carry around families.

Used Cadillac Escalades are almost 36% more.

Chevy Suburbans jumped 34% in price.

Dodge Grand Caravans are also seeing a 34% increase.

BMW X5 is 33% higher.

An Acura MDX will run you 29% more.

Visnick says even smaller models are pulling higher prices...an average of 10% more.


http://www.610wiod.com/cc-common/news/s ... le=7510712

[jag]

However, what CFC did do, with admirable success, is remove a large number of inefficient, safety-challenged vehicles from the roads. Thus, fuel consumption and air pollution are, as a whole, less. Newer vehicles have more and better safety features than their older counterparts, so safety for all improves as well.

And as far as new car sales being down, how is that connected to CFC?

[Bob Campbell]

Fortunately, new car sales are up this year, GM and Ford making profits, GM paying off debt and filing IPO papers. Damn, the auto bailout worked.

[AmpedNow]

By the early 90's, the "Pinto death traps" were long gone, thanks to improved technology and safety standards. Many vehicles had airbags, and overall MPG improved dramatically from the 70's, with the exception of the late 90's SUV glut, which was largely a voluntary decrease.

Granted, vehicles are even safer now than they were then. But to imply that vehicles more than 5 years old are "death traps" is simply not true.

The majority of the vehicles destroyed were less than 10 years old. Their absence from the roads probably had a negligible effect on global greenhouse emissions, but made it harder for the poor and working class who usually can't afford a brand new vehicle to obtain reliable transportation.

Practically, CFC was a useless program. Vehicles simply wear out over time with use. A minority of them are older than 20 years.

Oh, and Toyota still sold more vehicles than the Big 3 under that program -- even though it was designed specifically to help them.

[jag]

With all due respect, AmpedNow, I don't see, in reviewing the postings, that vehicles more than five years old--or any vehicles, for that matter--have been implicated as "death traps." It is clear, however, that ANY benefit to the environment is a positive thing. By extension, if all older vehicles were replace with newer ones, then the effect would be far more dramatic.

And, given how many employees Toyota has in the US, their corporate boon was also a boon (in fairness, perhaps a "boon-let") to the economy. Those who were not able to participate in CFC will likely benefit from the sales increase of new cars as more older ones are traded in.

[CoolBreeze]

Costs and Consequences

1. The policy concentrated benefits on political interests. Because the stimulus focused on the auto industry, many wondered whether the policy was a means not only to rescue a bloated, wasteful U.S. auto industry, but to pay back the unions—particularly the United Auto Workers—for their support for presidential candidate Barack Obama and the Democratic Party in the 2008 election. The economy and the environment provided a moralistic cover. But keeping Detroit on life support was an industrial policy Democrats couldn't fail to undertake if they were going to maintain perpetual power.

2. The policy had the effect of sucking revenues from other industries ailing from recession. In other words, if people are paid to spend money on cars, they're less likely to spend money in other sectors. If people have new car payments, they're less likely to visit restaurants, shop for new furniture or a computer, or even give to charity: "There's a whole industry that helps support the charities, including the auctions, tow truck drivers, telephone answering personnel; and all of those people are going to be hurt," said Pete Palmer, a co-founder of the Vehicle Donation Processing Center, which handles the sales of donated cars for charitable organizations. "Somebody has to be pretty darn altruistic to do a car donation over the Cash for Clunkers program if they want the new car," Palmer lamented.

3. The policy destroyed goods that had value, which means it destroyed value. Professor John Quelch of Harvard Business School writes: "A $2,500 incentive would have attracted the older, most fuel inefficient used cars. Instead, a $4,500 incentive attracted many perfectly serviceable vehicles. Because of government concerns over fraudulent recycling of trade-ins, vehicles had to be destroyed." Quelch shows that even smaller incentives would have destroyed perfectly serviceable cars. As we alluded to above, many potential "classic cars" of 2050 have been obliterated. Whatever the incentive, this also illustrates that present and future value can be destroyed by degree.

4. The policy distorted the used-car market by reducing the availability of cars desired especially by the working poor. Why, in the middle of a recession, would anyone want to drive up the price of goods used by society's most vulnerable people? This may be the kind of thing socio-economic behaviorists don't think through; if they do, they're willing to look the other way for the sake of their supplicants. In any case, the mandatory destruction of a half-million used vehicles amounted to the price of basic mobility going up for lower-income people. Used-car customer Jason Boyer of Auburn, Pennsylvania, said: "I saw the cars they were putting in the junkyard, and they were better than what we're driving now,"4 He and his wife had been trying to buy a used car in the wake of Cash for Clunkers.

5. The policies’ stated goals, if met at all, were met inconsequentially. Shikha Dalmia, writing for Forbes, shows improvements in air quality and fuel savings were virtually undetectable: "Even if one accepts [Transportation Secretary Ray] LaHood's numbers, the fuel savings add up to only 72 million fewer gallons of gasoline every year—about what Americans consume in four and a half hours." But Dalmia concluded we shouldn't accept LaHood's numbers, as "the program is effectively paying drivers to trade in their clunkers for—hang on to your recycled hats!—other clunkers." That is, people weren't buying hybrids, but rather SUVs.

6. The policy generated considerable opportunity costs. Even if you grossly overestimate the success of the policy, the costs of forgone uses of the resources are, though impossible to measure, still considerable. In other words, every dollar you spend on x is a dollar you cannot spend on y.

7. The policy successfully purchased a prophecy that would have fulfilled itself within two or three months. Most of the people who participated in Cash for Clunkers would have bought cars soon anyway. As car review company Edmunds famously pointed out, the policy shifting buying patterns forward a few months at most. Here are the results: "Nearly 690,000 vehicles were sold during the Cash for Clunkers program, but Edmunds.com analysts calculated that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway, regardless of the existence of the program."5 The analysts also concluded that the program ultimately cost taxpayers $24,000 per vehicle.

8. The policy subsidized people to make unwise purchases. It may take more time to determine this fallout, but—like subprime mortgages and artificially low interest rates—some people had incentives to get into cars they would have wisely avoided.

9. The policy allowed politicians to claim success despite failure. When any macro-economic policy measure is complicated and convoluted, it's easier to obscure what goes wrong. This is exactly what Congress and the Obama administration did in this case. A lot of politicians deluded themselves so thoroughly that Congress went back for another round, extending the program. The "popularity" of the program, which was defined simply as people's willingness to take free money, made "success" a foregone conclusion. Not everyone was buying it, of course, but Congress was undeterred.

10. The policy was an old-fashioned wealth transfer. "A and B put their heads together to decide what C shall be made to do for D" wrote William Graham Sumner in 1883. "The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C's interests, are entirely overlooked. I call C the Forgotten Man." But let us not forget C. Government resources come from somewhere, as did the cash for all those clunkers.

If nothing else, Cash for Clunkers allowed America's most resource-glutting corporations to slouch onward—to tread on the skeletons of stillborn businesses, to host union parasites, and to elude creative destruction for a few more years.

http://www.american.com/archive/2010/ju ... rospective

[AmpedNow]

With all due respect, AmpedNow, I don't see, in reviewing the postings, that vehicles more than five years old--or any vehicles, for that matter--have been implicated as "death traps."

I apologize.

When you said, "However, what CFC did do, with admirable success, is remove a large number of inefficient, safety-challenged vehicles from the roads.", it wasn't much of a logical leap to conclude that vehicles only a few years old were safety hazards. But I did add "5 years" and "Pinto death traps", which is not what you said.

It is clear, however, that ANY benefit to the environment is a positive thing. By extension, if all older vehicles were replace with newer ones, then the effect would be far more dramatic.

Again, the problem is that many of the scrapped vehicles were less than 10 years old. Vehicle emissions controls have been on vehicles since the late 70's, and by 2000 were already pretty damn good.

In fact, with the exception of more quality higher MPG vehicles and hybrids available now, emissions controls on gasoline and diesel engines have changed very little in the last decade.

Meanwhile, China continues to crank out vehicles with virtually no emissions controls at an alarming pace. Leaded fuel is still used there, for crying out loud... We make gains, while they continue dirty up the environment. We are the big, bad polluters who must pay reparations to the rest of the world while developing countries get a free pass? Don't think so...

And, given how many employees Toyota has in the US, their corporate boon was also a boon (in fairness, perhaps a "boon-let") to the economy.

Toyota is critical to the U.S. economy. But they are seen by the UAW, and this administration, as a force to be assimilated or destroyed.

It's funny how neither Toyota, the NTSA, and other third parties have been able to recreate a single "runaway Toyota" despite thousands of experiments... It's looking more and more like a hitpiece on Toyota's reputation than anything else. After all, if the government owns the majority of GM and Chrysler, do they not now have a vested interest in seeing their competition knocked down a few pegs?

Even so, the cameras have moved on, but Toyota is still left with a tarnished reputation and billions in lawsuit claims against it.

This was my biggest problem with the bailout: once that happened, it made it impossible for the government to remain impartial to free market competition. How can anybody possibly win that battle?

CFC was designed to help the Big 3, not the import companies. But yet they couldn't be excluded from the offer because that would have been, well, outright communist.