Cash For Clunkers

**GREENTROIT** · June-19-09, 07:44 AM

Well congress approved the cash for clunkers program yesterday. It's meant to reduce dependency on oil by rewarding people who get new vehicles that improve their gas mileage. It was also very much hoped for in these parts by GM and Chrysler, to get more people in showrooms.

From the AP: "Under the proposal, car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 mpg. The value of the voucher would grow to $4,500 if the mileage of the new car was 10 mpg higher than the old vehicle. The miles per gallon figures are listed on the car window's sticker. Owners of sport utility vehicles, pickup trucks or minivans that get 18 mpg or less could receive a voucher for $3,500 if their new truck or SUV got at least 2 mpg higher than their old vehicle. The voucher would increase to $4,500 if the mileage of the new truck or SUV was at least 5 mpg higher than the older vehicle."

I can see the benefits of this, and while I'm sure it will help GM and Chrysler, I don't see it helping a lot. It seems to me that if people want 30 mpg cars they will end up at Honda or Toyota who have the perception of having such great MPG. Just wondering how everyone feels about this, not so much politically but how it may affect Detroit...

**Johnnny5** · June-19-09, 08:24 AM

My guess is that dealerships are going to be the biggest winner in this deal. If one is forced to trade in their current vehicle the dealership would have little incentive to offer a fair price. Hopefully the legislation was written in such a way to insure the buyer is the one who receives the credit.

**DetroitPetanque** · June-19-09, 09:16 AM

Nice upgrade...

**Johnnny5** · June-19-09, 09:50 AM

I just read some of the details of this legislation and was astounded to see that the vehicles being traded in would be destroyed! I take back my statement that dealerships will benefit the most from this legislation. Scrap yards and black market parts sellers are going to end up on top of this.

**GREENTROIT** · June-19-09, 10:01 AM

A lot of customers will benefit from a nice credit towards a down payment, too. If you drive a 1990 Ford F-150 that gets 12 MPG and is worth about $1,000; you can turn it in for a $4,500 down payment and get a new ride. It's going to benefit a lot of people, probably help to sell a few cars.

**CountrySquire** · June-19-09, 12:07 PM

Does the intended vehicle need to be one that has an EPA rating? I was considering trading my '91 Ram which has a posted EPA rating of 12 mpg city for a '09 F250 with a diesel. I hear that diesel pickups with 4x4 can get about 22 mpg. But on the Fuel Economy.gov website it says these vehicles are 'exempt' from testing.

**GREENTROIT** · June-19-09, 12:15 PM

This makes it sound like it's all yet to be figured out, but you might need to talk to your dealer:

http://www.freep.com/article/2009061...0619020/?imw=Y

lilpup · June-19-09, 12:22 PM

Edmunds.com has an article and a list they compiled

http://www.edmunds.com/industry-car-...-clunkers.html

**luckycar** · June-19-09, 12:52 PM

Let me in on this.If you are driving a 1990 F-150,Ram 1500 or Silverado 1/2 ton that gets 12 mpg in a good state of tune,its worth about 800-1000 depending on the body.A 2010 diesel,or GM gas/battery combo will get 20-24 on the open road.The govt. will give you a $4500.00 voucher.The cost of these trucks with all the discounts is around 30-35K.If your riding around in a 15-20 year old truck,are you going to shell out this kind of cash?It will take years of driving your old truck,or one of newer vintage to spend 30,000 in gas.And what about the payments and insurance? Who is this aimed at?Feel good,do good programs coming from people that don't live in our world are putting this country in a bad way.
If these cars and trucks are to be scrapped,I'm raising my prices,now.

**GREENTROIT** · June-19-09, 01:01 PM

luckycar...

What if the person that you describe wants a Chevy Malibu instead of the $35,000 truck you described. A $4,500 down payment towards a $23,000 Malibu with almost 30 MPG would be a pretty nice investment. Monthly payments would obviously be higher than the zero, but gas costs would be less than half, and service costs would be way lower. This program will definitely be used by a lot of people.

**luckycar** · June-19-09, 01:10 PM

But alot of people aren't in the car market now.It went from 15 million to less than 10,fast.Will they come back,and do they support GM and Chrysler?Our state will sink or survive on the outcome.I only hope they go out and buy that Malibu made at Orion,or a Sebring from Sterling Heights.

**reddog289** · June-20-09, 12:03 AM

I guess I will have to figure out my mileage on my 2 vehicles.My 91 Buick was getting 33 mpg highway on it's big trip 18months ago. We don't normally fil up our vehicles, So figuring mileage is more math than I'll deal with.I would take $4,500 for my 1990 Ranger, But I would have to come up with the cash to pay for the rest of it.

**CountrySquire** · June-20-09, 08:49 AM

Originally Posted by GREENTROIT

luckycar...

What if the person that you describe wants a Chevy Malibu instead of the $35,000 truck you described. A $4,500 down payment towards a $23,000 Malibu with almost 30 MPG would be a pretty nice investment. Monthly payments would obviously be higher than the zero, but gas costs would be less than half, and service costs would be way lower. This program will definitely be used by a lot of people.

Perhaps, but a "True" truck owner would not likely trade a pick-up in on a car. Ever try to haul a couch back home from the garage sale with a malibu?

**mjs** · June-20-09, 10:29 AM

The Feds idea is to pull sales forward. Say, a manufacturer has averaged 10 million units a year. They're selling 6 million now and assuming the economy recovers, the pent up demand means they'll likely sell 11 million next year and 9 million each year after that. Pull 2 million forward and you have a 8 million year and a series of 9 million years so manpower requirements are more consistent. Provide enough incentive to pull 3 million forward and you're just wasting money to create OT rather than save jobs and you move the manpower issues to next year.

Some people like my family hold on to vehicles until they're worth less than $5k because it can make other vehicles stay in better shape longer and because its often cheaper to insure two vehicles than one new one, but you can't keep a vehicle forever. These are the type of people that have both cash saved up and plenty of available credit. These are also the people that know that $4500 is $4500 dollars regardless of what type of vehicle you drive and that 15% of $30,000 is pretty damned good. They even consider that a slightly used vehicle is cheaper up front, but it finances at a higher rate, has fewer safety features for insurance reductions, costs more in gas, and needs repairs earlier so $4500 is quite the gap closer.

My Dad will likely trade in his old van for a new Flex. My parents usually have two late model vehicles and one newer vehicle. One each for day to day and one for special occasions or a back up of the older vehicles. They also try to have two cars and one van or SUV. Fuel efficient for day to day and something for vacations, towing, and moving larger objects. My sister and her husband do something similar and my brother is in construction so he has an old work truck, a new truck for vacations, towing, etc, and a car for day trips and chores. He just traded in his work truck for a new truck and made his other truck his work truck. However, he got more than $4500 trade-in.

I just got a newer vehicle myself. I usually keep the old one to keep the newer one in good condition for longer, but this time I was offered $1000 on a $500 vehicle that needed $1000 just to keep it running. I also saw a 30% improvement in fuel efficiency. Anyone of us could have an old vehicle to trade in at any given time and could find use for something like an electric vehicle or hybrid with limited range. The Feds understand what my brother likes to say, "for the right price, its all for sale".

**mjs** · June-20-09, 11:19 AM

Originally Posted by luckycar

Let me in on this.If you are driving a 1990 F-150,Ram 1500 or Silverado 1/2 ton that gets 12 mpg in a good state of tune,its worth about 800-1000 depending on the body.A 2010 diesel,or GM gas/battery combo will get 20-24 on the open road.The govt. will give you a $4500.00 voucher.The cost of these trucks with all the discounts is around 30-35K.If your riding around in a 15-20 year old truck,are you going to shell out this kind of cash?It will take years of driving your old truck,or one of newer vintage to spend 30,000 in gas.And what about the payments and insurance? Who is this aimed at?Feel good,do good programs coming from people that don't live in our world are putting this country in a bad way.
If these cars and trucks are to be scrapped,I'm raising my prices,now.

You're talking about a 15 to 20 year old truck. It likely has 300,000 miles by this point. The thing can't run forever and its likely picking up some repair bills by this point. Assuming you get 300,000 out of the new one, the difference between 12 mpg and 17 mpg is 7350 gallons. Assuming gas averages $3/gallon over the next 15 to 20 years, thats $22,000 in fuel savings.

A fully loaded regular cab 1500 comes out to $26,000 to $27,000 after all the incentives and the $4500. If you're thinking of buying in the next few years, now is the time.

**reddog289** · June-21-09, 01:44 AM

After looking at the list the only vehicle at my house that isn't on it is my 91 Buick.

**56packman** · June-21-09, 10:34 PM

Originally Posted by GREENTROIT

A lot of customers will benefit from a nice credit towards a down payment, too. If you drive a 1990 Ford F-150 that gets 12 MPG and is worth about $1,000; you can turn it in for a $4,500 down payment and get a new ride. It's going to benefit a lot of people, probably help to sell a few cars.

If you are driving a 1990 F-150 that's worth $1,000 and the monthly note on a new vehicle is out of the question what good is the bill? Unless something really expensive breaks one would tend to keep driving the 1990 F-150 and pay the difference at the pump, incrementally. Then when the '90 F-150 dies get an '01 F-150 for $3,500 and keep on keepin' on.

**mjs** · June-21-09, 11:31 PM

If you drive a $1000 vehicle because you can't save for a new vehicle or get approved for one, this bill is no good to you and it shouldn't be. Its a bad idea to get you into a new vehicle you can't afford and buying it will only create more problems.

If you drive a $1000 vehicle because you're frugal and responsible with your money and credit and its still running, this bill will give you an incentive to trade that vehicle in this year rather than next year or the year after and it should. Those in hock up to their eyeballs can't get us out of this. We know you are our only chance and want to help you help America out of this by buying now.

**56packman** · June-21-09, 11:42 PM

Originally Posted by GREENTROIT

luckycar...

What if the person that you describe wants a Chevy Malibu instead of the $35,000 truck you described. A $4,500 down payment towards a $23,000 Malibu with almost 30 MPG would be a pretty nice investment. Monthly payments would obviously be higher than the zero, but gas costs would be less than half, and service costs would be way lower. This program will definitely be used by a lot of people.

OK, lets suppose for a minute that you are a landscaper, haul boats, or have a business that uses a truck, F-250 and up to do the heavy work that only a vehicle in that size can do. That truck is a tool of your business, how you earn your living. You can't bring your 24 foot equipment trailer to a jobsite behind a Malibu [[which is a great car) or a Hybrid. Unfortunately, those trucks count towards the CAFE numbers, beyond all of those individuals who buy trucks as a "lifestyle vehicle."

**reddog289** · June-21-09, 11:57 PM

Sure I would love to get $4500.00 for my truck, Yet I would end up with a truck. I found hauling crap with a truck, any truck is better than an SUV, Old Buick or whatever. Besides of the 4 vehicles on the list that are parked at my house, I only own one of them. And have only had the truck for 9 months. There is a catch to everything.Another Govn't program that I can't benefit from.

**reddog289** · June-22-09, 12:00 AM

And another thing. With my house payment going up $177.00. That pretty much killed my goal of getting a new car/truck.

**oladub** · June-22-09, 12:13 AM

According to the principles of EROIE , 'energy returned on energy invested', this idea is nuts. In many cases, the government will be causing energy waste and energy inefficienciies. Let's say you want to junk your full size Chevy Blazer with 90,000 miles on it to purchase a new Prius. The Blazer might have another good 40,000 miles on it before it starts falling apart. EROIE considers not only fuel usage but also the energy used in the manufacture and transport of the car. In other words, the energy used to derive the coal and steel used tomanufacture the Blazer and the energy used to transport it from Japan would have to be wieghed against the fuel savings that the Prius offered over the Blazer in the next 40,000 miles. It could be that fewer BTU's would be used by running the Blazer further than by scrapping it and replacing it with a Prius if EROIE were considered. At some point, if the Bazer lasted long enough, it would make conservation sense to scrap the Blazer. This isn't all bad though. Everyone will be trying to pick up an old heap just to drive to the dealer so it may create better prices for heaps.

**mjs** · June-22-09, 01:10 AM

First, you have to have owned and insured the vehicle for at least one year so you can't buy one to trade-in or drag in the tireless vehicle from the back forty that hasn't ran in ten years. Second, if you have a Full Size Blazer with 90,000 miles, its worth more than $4500 so I wouldn't advise trading it in for a $4500 voucher especially if you think it has a few hundred miles left on it. Third, if I were a dealership, I'd avoid the voucher, pay $4500 out of pocket and resell it for a much larger profit than the voucher offers me. Fourth, we do make steel here in the US and steel is the most recycled material in the world so the energy loss isn't as bad as you think and I think 60% of all steel production is from 100% recycle and the rest uses 40-60% recycle depending on several cost factors. Fifth, if the vehicle can't fetch a $4500 trade in, its going to be going to the salvage yard soon enough.

**oladub** · June-22-09, 02:05 AM

I didn't know about the one year ownership requirement. That, at least, will cut back on some of the fraud. Three way deals might be required. The value of the hypothetical Blazer is also determined by things such as whether it needs body work. Pity poor people who suddenly won't be able to have as many cars to choose from costing less than $4,500. As has previously been mentioned, this money could be applied to foreign cars which already make up a disproportionate percentage of high gas mileage cars. Even if the $4,000 is used to purchase American cars, the taxpayers would never get their investment back - especially if EROIE calcultations were made. As a taxpayer, I have enough trouble saving money for new cars that I want.

When our bankrupt government starts handing out $8,000 to house purchasers and up to $4,500 for purchasing Government Motor's Chinese imports, is time to guard one's wallet

**mjs** · June-22-09, 08:48 AM

The last part is why despite there being worse things the government can do, I'm against this law in general. Bank bailout gave money to some of the people that didn't follow what old school financial advisors tell us to. This gives money to those that do. What goes up must come down and in a budget, what goes out must come in. It doesn't grow on trees. We can't sustain a system where Peter robs Paul to pay Mary so Mary has the equipment she needs to rob Paul to pay Peter.

Now that you got Mr. Frugal to buy a new car, I guess that sale that was coming from his buying a new TV just went out the window. Good for Mr Frugal, but not so good for our GDP and GDP growth is how we define recessions and recoveries. I'm so happy every time Oladub references the fact that the New Deal never fixed the depression. What I can't understand is how things that didn't work last time the markets got over extended are supposed to work this time.