What does the Cash for Clunkers achieve?

By now most people have seen the Car Allowance Rebate System (CARS) bill (referred to as ‘Cash For Clunker’s). The stated goals are:

• Get gas guzzlers off the road to help sustain the environment
• Stimulate the economy by increasing car sales

Unfortunately, the fine print on the article will cause neither of these things to happen. In fact, I can’t think of any effect this bill will have.

Consider the following:

1. The owner has to own the car for at least one year before trading it in. This means you can’t sell your clunker to somebody so they can use it to get a discount.
2. Cars and trunks more than 25 years old are not eligible. So nothing before 1984.
3. The passenger vehicles have to get 18 miles per gallon or less to be eligible. During the muscle car era, this was pretty common. However, muscle cars are not eligible because they are more than 25 years old. After the gas crises in the ’70s auto makers focused heavily on gas mileage in an attempt to remain competitive and by 1984 very few cars were still seeing worse than 18 miles per gallon. So passenger cars are now out of the running.
4. The discount does not apply if the value of the trade in vehicle is more than than the $3,500 or $4,500 the bill provides.
5. This discount is only applied when purchasing a new vehicle.

This means that the only people who will see a benefit from this program are people who have had the same poor mileage truck, made after 1984, which is worth less than $4,500 for more than a year and are looking to buy a brand new car. Unfortunately, this demographic of clunker owners are most likely either very frugal or in a poor financial position. Neither of which are likely to purchase a new car. Instead, it is better for these people to sell the car for what little it is worth and buy a used car than to go to a dealership.

Had this program been implemented differently there might have been some value. If owners of old, less efficient vehicles could use this bill to trade up to slightly less old more efficient vehicles there would be some value. Yet this is not the case and I do not predict very much movement as a result of this useless bill.

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