Cash for Clunkers

[Terry_P]

The highly touted program to stimulate auto sales is over and now the figures from the program are coming to light. Was it a good deal for the American taxpayer? You decide.

The program gave rebates of up to $4,200 per vehicle for fuel efficient models. Intuitively you would think the cost of the program was simply the rebate amount times cars sold and you would be right. However what is the true cost of the program? To determine that you need to look at the incremental sales that resulted from the program being in place or the extra cars that would not have been sold if the program didn't exist. That has been done and the true cost of the program has been calculated at $24,000 per extra vehicle sold. So for each sale generated by the program five others got a $4,000 bonus in buying their vehicle. Anyone surprised?

http://online.wsj.com/article/BT-CO-...28-715225.html

DOW JONES NEWSWIRES

The government's "Cash for Clunkers" program may have only added 125,000 vehicle sales, according to Edmunds.com, which said the rest of the units sold would have happened regardless of the program.

In total, the car-shopping Web site said about 690,000 vehicles were sold during the program. Edmunds.com said that based on the actual sales gained from the program, the Cash for Clunkers program cost taxpayers $24,000 per vehicle sold.

"Our research indicates that without the Cash for Clunkers program, many customers would not have traded in an old vehicle when making a new purchase," said Edmunds.com senior analyst David Tompkins. "That may give some credence to the environmental claims, but unfortunately the economic claims have been rendered quite weak."

Edmunds.com Chief Executive Jeremy Anwyl noted that while sales are up in October from September, growth would have been even better without the program. He said that suggests the auto industry's recovery is gaining momentum.

Sales surged in late July and most of August as the program was in effect, giving certain new-car buyers up to $4,500 in rebates if they traded in a gas-guzzler. But U.S. auto sales slid in September absent clunker-related deals. Other countries still have so-called scrappage programs in effect.

-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

[oldogy]

Hobama knows best. All those clowns in DC know best. Yeah, right! When I hire someone to tell me how to control, spend my money or invest my money I want someone who at least has some fiscal knowledge. I want the best, not a bunch of clowns who believe in hope and change. GGGGGGGGGGGGGRRRRRRRRRRRRRRRRR.
Oh, crap, I forget, it is about redistribution of wealth. GGGGGGGGGRRRRRRRRRR again.
oldogy

[topper]

IMO, "cash for clunkers" was a dismal failure. Those cars that were traded in for the newer ones were crushed. Why? They were still usable and saleable. Just think of al the autos in the nation that are not fuel effecient and what was sold under the cash for clunkers program was a mere drop in the bucket so to speak of what is being driven daily. So, it was a money making scheme for the auto dealers that the poor taxpayers got to pay for in the end...$3 Billion. And the same folks that made up the cash for clunkers (that failed) are the ones that want to control our healthcare. Think about that.

[momo]

I found this interesting:

SO...you took FEDZILLA up on its offer of $4500. dollars to trade in your old "Clunker" (interesting choice of words)? Well, let's see who got the best of that "deal"...



If you traded in a clunker worth $3500, you got $4500 off for an apparent "savings" of $1000. You could have gotten $3,500 if you had just traded the car in. So you really are $1,000 ahead (depending on your clunker's value) at this point. Not too bad...



However, you WILL have to pay taxes on the $4500 come April 15th (something that no auto dealer will tell you). If you are in the 30% tax bracket, you will pay $1350 on that $4500.



So, rather than save $1000, you will actually pay an extra $350. to the feds. In addition, you traded in a car that was most likely paid for. Now you have 4 or 5 years of payments on a car that you did not need, trading in a "clunker" that was costing you less to run than the payments that you will now be making. Even if you save $1,000. dollars a year in gas due to better mileage, you're still gonna be in the red for five years....hello?



But wait, it gets even better: you also got ripped off by the dealer. For example, the month before the "cash for clunkers" program started, every dealer here in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500. because competition was stiff due to poor sales from the stalled economy.



When "cash for clunkers" came along, they stopped discounting them and instead sold them at the list price of $15,500. So, you paid $3000 more than you would have the month before. Honda, Toyota , and Kia played the same list price game that Ford and Chevy did. Now let's do the math...





You traded in a car worth: $3500

You got a discount of: $4500

---------

Net so far +$1000

But you have to pay: $1350 in taxes on the $4500

--------

Net so far: -$350 (that's minus...in the red)

And you paid: $3000 more than the car was selling for the month before

----------

Net Loss: -$3350



We could also add in the additional taxes (sales tax, state tax, dealer prep, etc.) on the extra $3000 that you paid for the car, along with the Five years of interest on the car loan; but let's just stop here while you kick yourself. Suffice it to say that those costs will be much higher than any savings you get from "better mileage".



So who actually made out on the deal? FEDZILLA collected taxes on the car along with taxes on the $4500 they "gave" you. The car dealers made an extra $3000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. Manufacturers got to dump lots of cars they could not give away the month before. Lots of good or repairable used cars got taken off the market, crushed and sold as scrap metal to (ready for this?) CHINA! (Look it up...) And the poor consumer got saddled with even more debt that they cannot afford.



FEDZILLA'S merry men (who promised that people making less than $250,000. would pay "not one red cent more in taxes") will make millions in new tax revenues after convincing Joe Consumer that he was getting $4500 in "free" money from the "government" In fact, Joe was giving away his $3500 car and paying an additional $3350 for the privilege. Chicago politics gone global...with an agenda.



If you find errors in this math, please let me know...being a simple guy, I'm always willing to learn new things; and if you took "advantage" of the Clunkers deal, I have some swamp land down in Florida that's for sale...

[Terry_P]

This is my understanding of the taxability of the program:

Federally the rebate is not taxable

State Sales tax is being charged on the rebate amount in the following states:

•Arizona
•Idaho
•Nebraska
•New Jersey
•New York
•Ohio
•South Carolina
•South Dakota
•Virginia
•Washington


States Charging NO Sales Tax on the Clunkers Credit:

•California
•Connecticut
•Florida
•Georgia
•Illinois
•Indiana
•Kansas
•Kentucky
•Louisiana
•Massachusetts
•Mississippi
•Minnesota
•Texas
•Wisconsin

If your state has sales tax and isn't listed they haven't figured it out yet.

State Income Tax:
Stay tuned most are still formulating their approach.

[JohnBrainard]

Originally Posted by topper

IMO, "cash for clunkers" was a dismal failure. Those cars that were traded in for the newer ones were crushed. Why? They were still usable and saleable. Just think of al the autos in the nation that are not fuel effecient and what was sold under the cash for clunkers program was a mere drop in the bucket so to speak of what is being driven daily. So, it was a money making scheme for the auto dealers that the poor taxpayers got to pay for in the end...$3 Billion. And the same folks that made up the cash for clunkers (that failed) are the ones that want to control our healthcare. Think about that.

Unfortunately, I don't think the dealers even made any money off of it. They make their money off of used car sales. They couldn't turn around and sell the cars that were traded in under the Cash For Clunkers program.

Look at the bright side, though... It did get a lot of Obama stickers off the road!

[Redhand]

The Title Loan businesses will have some great deals in the next 6-12 months when those payments aren't made.

[Terry_P]

Unless Obama wants us to pay their car loans as well as their mortgage.

[dge479]

Originally Posted by Redhand

The Title Loan businesses will have some great deals in the next 6-12 months when those payments aren't made.

I hope so, I work at a car auction and its pretty slow.

[dge479]

Originally Posted by JohnBrainard

Unfortunately, I don't think the dealers even made any money off of it. They make their money off of used car sales. They couldn't turn around and sell the cars that were traded in under the Cash For Clunkers program.

The only real benefit for them is if they had these cars on borrowed money "floor planned" where they pay interest on the sitting car.

[AnthemBassMan]

-I looked into that program when it first started up. I thought I'd get a few extra $$$ to get a new car. So I go to the Gubmint site and enter my car to see about qualifying. Let's see. I have a 1994 Ford Tempo with 194,000 miles on it. Nope. It doesn't qualify. Now if this car isn't a clunker, what is? Not that I don't like my car. I've had it for 11 years now and have had it everywhere from Myrtle Beach to Maine many times, and I live in Ohio. Oh yeah. It didn't qualify because when my car was new 15 years ago, it got 2 MPG more than their guidelines!!

L8R,
Matt

[Lone Wolf]

I also looked into it. I was looking to trade my 1988 Chevy S-10 with 170,000 miles. Worth about 500 bucks or so. But wanted to step up to a full size truck. You guessed it, didnt qualify. My 1988 S-10 got 2 mile a gallon better milege than a new full size truck. I qualified for all kinds of cars. But I already got a 2004 Impala.

[ampaterry]

There is a bit of mis-information here on this program.
I looked into it when it appeared the block had cracked on the engine of my 99 Cad Concours. The car, although I LOVED it - had a LOT of problems including being due for a new $800 set of tires, so we checked at the Nissan dealer we have dealt with for years and found the Cad was rated at 18 MPG, which is the highest that still qualified for the program.
If we traded it for a car that got 24 MPG to 27 MPG (6 to 9 MPG improvement), we would get $3500 for it.
If we traded it for a car that got 28 MPG (10 MPG improvement) or more, we would get $4500 for it.
The program requires that the engine and transmission be rendered inoperable.
Both had to be drained and a sodium silicate solution poured into them, than ran until they seized up. The rest of the car was sold to a salvage dealer for $1000, which was given to me as part of the deal. That dealer could strip it for parts, crush it, or whatever he wanted to do with it.
We test drove 28 MPG cars (Versa and Sentra) and opted to settle for the lower $3500 deal on a much more comfortable Altima.

The Cad had to be in operating condition at the time of the deal. One of the dealership guys had to take it out and drive it around to verify this.
Before he went on this test drive, I saw a small stream of engine coolant running out from under the engine area, and crossed my fingers that it would run long enough to qualify.
It did.

Now about the claim that there is federal tax on this -
The government did not GIVE this money to me.
They BOUGHT my car with it so they could destroy the engine and transmission, and get a gas-guzzler off the road.

As to the math example showing this program is a bad deal, it is flawed.
Go to the IRS site HERE and you will find this:

Cash for Clunkers
A $3,500 or $4,500 voucher or payment made for such a voucher under the CARS “cash for clunkers” program to buy or lease a new fuel-efficient automobile is not taxable for federal income tax purposes.

There is indeed no federal income tax involved, even filing the 1040 EZ form.
Since the government takes your car to dispose of it as they will, I doubt any state will get away with calling that 'income' either.

The dealership would NOT dicker prices during this program, because people were MOBBING the place and buying everything they had in stock so they did not HAVE do dicker. They absolutely sold out under this program at a time when sales were completely stalled. There was in place a factory rebate program, however, that still applied so we did quite well on this.

New vehicles financed through a title loan place?
I must admit I have never heard of that.
Title loan places normally do not finance anywhere NEAR the retail price of a new vehicle.

I cannot speak for the overall effect of this program, but I know the dealerships around here sold cars like CRAZY, provided they had cars that got at least 23 MPG. And I do know there were a LOT of new mileage efficient vehicles with temp tags in this area for several weeks after this program was over.

[obxned]

Since Obozo totalled 690,000 perfectly useable cars in his car sales scam, the supply of used cars in now reduced to the poimt of making the prices much higher than before. With new car sales now stagnant, no addittional used cars are entering the market and used car prices will continue to rise.

I had planned on trading my old pickup on a much newer used one this winter, but the prices and selection of nicer used trucks makes me rethink my plan.

So, Mr. Obozo, here's another "NO SALE" you can ring up.

[Big ugly]

For everyone that participated in the cash for clunkers deal. Should have kept your original car. Lets think about this as far as money savings.

we have a 91 GMC Safari van. Paid 2000 for it used. Had it for a few years tranny goes out. 695 to repair. Starter, 110 repar, Battery, 98,repair Tires and breaks, 366 to fix. and it was eligable for the cash for clunkers.


So you figger less than 3000 to maintan the vehicle other than Rutine maintenace for three years. Now if you buy a new car it is gonna cost you more than 1000 a year to keep your hide in it.

[Redhand]

Title Loan companies don't finance cars. They loan money against the title at pennies on the dollar of the wholesale value. If the party doesn't pay,the car is repossed and the title loan co. dickers with the finance co. for a ridulous price and the finance co. writes it off as a bad loan and the title company gets the car to sell at a very tidy profit.

[topper]

If the cash for clunkers were done right, it might have been worth it. True clunkers would have to be traded in ( old, gas guzzling, beaters, high mileage only) and the owner given CASH for the clunker, no tax on the government rebate money, and a special lower price just for the clunker program. Then and only then would it be worth it to trade.

[ampaterry]

Redhand, I worked at Pacific Finance for a decade, and I have never come across a deal such as you describe. The Title loan companies normally hold your title when they give you money. If your car is financed, you don't have the title - the finance company does. The finance company is not going to give up their interest in the security and write off a loan when the car is legally theirs to start with; they will re-posses the car and sell it themselves, then go after the debtor for the debit balance.

Topper, you describe exactly what we did.
We had a clunker that was costing us a FORTUNE to keep running in repairs and fuel. Althought the cad did not do too badly on gas (23 around town, 30 highway), it used premium fuel only - the new one gets 29-31 around town and up to 39 on the highway, and uses regular.

Big ugly, your repairs are WAY lower than ours were; Cad is VERY proud of their parts, and charges dearly for them. The new engine I needed, for instance (Northstar V8), cost $9000 installed. The A/C compressor cost $1800, the alternator cost $900 -
I don't remember what they charged to find and replace a bad relay, but it was several hundred -
And it ATE tires, no matter how well aligned and balanced we kept it.
$800 a set -
There were other repairs as well, but that is all that comes to mind during the less-than-four years we owned it.
Payments on my Altima are only $400 a month - WAY less than I was spending in repairs.
And with a new vehicle warrantee, there aren't going to be any repair bills -

My last Nissan car was a 240 SX, and I drove it a quarter of a million miles without ever even opening the engine -
One set of brakes -
One master cylinder repair on the clutch -
That's it for repairs.

[Big ugly]

In tour case it was a benifit cuz the car was a POS in a since and that is what the Clunkers deal should have been used for. TO get rid of older problem cars that the owner cant afford to repair. But most of the general populace to advantage of the deal and now newer cars are getting Repoed at an all timne high because of it. I Think it is a tragedy that these pople fell for it hook line and sinker into getting a new nar that they cant pay for. Even more money is beeing lost at some dealerships cuz of the expese it takes to locate a car and then pick it up and alot o times repair to sell again at a used car price.

[ampaterry]

Originally Posted by Big ugly

In tour case it was a benifit cuz the car was a POS in a since and that is what the Clunkers deal should have been used for. TO get rid of older problem cars that the owner cant afford to repair. But most of the general populace to advantage of the deal and now newer cars are getting Repoed at an all timne high because of it. I Think it is a tragedy that these pople fell for it hook line and sinker into getting a new nar that they cant pay for. Even more money is beeing lost at some dealerships cuz of the expese it takes to locate a car and then pick it up and alot o times repair to sell again at a used car price.

I was not aware of the record re-possessions going on.

First payments under the first days of this plan were due the end of August -

Finance companies USUALLY don't repo until payments reach the 60 days overdue point - meaning one payment is due and two others are past due.
That would be late October if someone never made the first payment.

So some people took part in this plan and never made the first payment on their car.

As Larry says; "You can't fix stupid!"

[ampaterry]

Just for the record, guys, I do NOT jump on government programs as a rule.

We are eligable for the 'greenbelt' plan, for instance.
Under this plan, the landowner agrees to NOT clear-cut his timber, and to NOT cultivate the land but leave it in it's more-or-less natural state.
In return, the land is assigned a USE value which is about half of it's REAL value.
Property taxes are based upon this use value.
The result is that by joining the Greenbelt, we could cut half of our property tax bill each year.
No thanks.

Years ago, my income was so scant we were eligable for food stamps.
No thanks.

My daughter was eligable for free lunches at school.
No thanks.

[Terry_P]

They call it current use in NH (it's 75%) and on my second property of 23 acres I have 21 under current use. I have a small drop on ranch house that my mother calls home and I still have to pay $3,200 a year in property taxes for that property.

Under current use in NH you obviously can't develop the property and you also can't post the property so hunters, fishermen, etc can access.

[mrkirker]

. . . . by joining the Greenbelt, we could cut half of our property tax bill each year.
No thanks.

Years ago, my income was so scant we were eligable for food stamps.
No thanks.

My daughter was eligable for free lunches at school.
No thanks.


Well, two outta three ain't bad.

[Gun Geezer]

First of all Ampaterry, I applaud you! If everyone had your attitude our country and economy wouldn't be in the condition it is.

I just read a summary of the effectiveness of the Cash for Clunkers Program and unfortunately it indicated it was not the glowing success our government sees through their colored glasses. A great number of buyers replaced their gas guzzlers with vehicles (even Hummers ) that got worse or only marginally better mpg's than the clunker.

It also appears to be true that many traded in paid for vehicles and now have monthly payments for the next 3-5 years that some will not be able to afford, especially if they lose their jobs or the economy tanks again.

As many have stated, no government run program ever saved anyone any money because of the bureaucratic booddoggle the bean counter's create, so there's no reason to think different of government run health care unless one is driven by the audacity of hope for something for nothing!