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Is Cash for Clunkers Really "Cash Out of the Economy?"

August 13, 2009

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Bob Barton, the president of the American Car Rental Association (ACRA) asks why vehicles built overseas qualify for the Cash for Clunkers program.  

 

A bizarre situation is unfolding with the Cash for Clunkers program. We see how much money is being spent-now up to $1.15 billion-but who's product is being sold? As I have said, if it is built in North America it should qualify, but why do vehicles that are built overseas qualify?

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Take a consumer driving a 15-year-old truck, one that's paid for and runs. If he qualifies for a loan (that in itself could be a miracle) and then buys an import from overseas, the government sends the $4,500 overseas. For the next 60 months, the payments on the loan probably go overseas, and the consumer stops shopping because he now has a car payment he didn't have before. In this scenario, I would argue Cash for Clunkers is really "Cash out of the Economy," for five long years. 

I have heard two very interesting stories so far regarding this program. The first is from a dealer who tells me that 75 percent of the cash-for-clunkers sales have gone to Korean manufactured cars.

That's bad, but the better one is from my next door neighbor. He went to trade in his old Mustang that has 150,000 miles on it and is burning oil. You would think this is the perfect car for the program: it pollutes, gets lousy mileage and needs to be retired. The dealer told him it does not qualify for the rebate because the difference in the gas mileage from his car to the new Mustang he wanted wasn't great enough. He couldn't understand, as it is getting about 10 mpg on his oil-burning, 150,000-mile car. 

Why won't it qualify? The determining factor is not what his car currently gets in fuel economy, but what the published EPA rating was at the time he bought it. You have to be kidding me--if everyone got the EPA miles that they used to, why would it be called a clunker in the first place? 

One of these days "car guys" will be consulted in developing these programs. I just wonder what the UAW worker who is about to lose his job thinks about his tax dollars being sent overseas to help someone else build a car that will compete with the car he used to build.

 

 

Comments

  1. 1. Crowfleet [ August 13, 2009 @ 12:17PM ]

    As a backup to what Bob is saying, this from cnbc:

    "Consumers have cut spending every month. The big surprise is that we thought 'cash-for-clunkers' was going to add to GDP but instead it took away spending elsewhere," said Christopher Low, chief economist, at FTN Financial in New York.

  2. 2. Jim Cocola [ August 14, 2009 @ 06:36AM ]

    This government has destroyed our own auto manufactoring companies since we allowed foreign cars to be been imported to the U.S. Now the government is shooting itself in the foot again by implimenting a program that will put the final nail in the coffin by allowing our money to again go overseas! I'm tired of seeing my country's jobs and money going overseas. This so-called president wants to see the worlds economy average out which means we will substancially lower our way of life to some level between that of an African or South American hut dweller! The way trade should have been set up is that if a foriegn car company wants to sell their product here in the U.S. they should have been made to buy an equal amount of same class cars to import back to their country. I don't care if they had no use for our cars and dropped them into the ocean at least we wouldn't be losing more of our countries strength by diluting our economy. What's wrong with these government officials? It must be true that the more intelligence people have in government the less common sense and foresight they have. Oh, and by the way, I was brought up in the 50's and 60's with the education that taking "Foriegn Interest" money meant graft, bribery, corruption or someone was on-the-take! When did our government officials change the meaning of those phrases to now mean "it's Ok" to break the law by accepting "bribes" from foriegn businessess or governments. I'm just totally disgusted with the U.S. governments way of handling this dilema! The end of our economy and standard of living is closer than we realize. Today it's the car industry, tomorrow it could be your industry whatever the next strongest is. Americans get a grip and support your neighbor and yourselves and "BUY AMERICAN", and I don't mean any other country in Nor

  3. 3. Crowfleet [ August 18, 2009 @ 07:45AM ]

    This in from Automotive News: Toyota Motor Corp. has overtaken General Motors Co. as the top manufacturer of new vehicles purchased under the U.S. cash-for-clunkers program.

    Toyota made 18.9 percent of all new vehicles whose clunkers deals had been submitted, the National Highway Traffic Safety Administration said in its second report on the incentive. GM accounted for 17.6 percent as of Friday, down from 18.7 percent on Aug. 5, when the initial tally was released.

    The Toyota Corolla remained the top new car purchased. The Honda Civic passed the front-wheel-drive Ford Focus as No. 2. The No. 9 Nissan Versa and No. 10 four-wheel-drive Honda CR-V bumped out the Chevrolet Cobalt and inventory-depleted Dodge Caliber in the top 10.

  4. 4. David Ruggles [ August 21, 2009 @ 10:30PM ]

    Its hard to believe there are still people who believe in protectionism. Smoot Hawley of 1929 must have been forgotten. Seems like we had a of protectionist legislation in the late 1800's that also led to recession. Actually, the "chicken tax" is still in place which places a 25% tariff on small imported pick up trucks. Its been in effect since the 60's.

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Author Bio

Chris Brown

Executive Editor

Chris Brown is the executive editor of Business Fleet Magazine and Auto Rental News. Through these publications, online newsletters, trade events and associations, Chris covers all aspects of the fleet world, including fleet management, manufacturer fleet activities, the fleet leasing industry, vehicle remarketing, rental industry news, car rental taxation and legislation.

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