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'Cash For Clunkers' losers and winners
Logo of the Cash For Clunkers Program
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TEXT OF STORY
KAI RYSSDAL: Now that it's through Congress, a $106 billion spending bill to pay for Iraq and Afghanistan through the end of the fiscal year is headed to the White House. The president is expected to sign it. Washington being Washington though, war spending's not the only thing that's in the package.
Among many other things, it also contains what has become known as the "Cash For Clunkers" plan. Up to $4,500 to get people to trade in their old gas-guzzlers for newer models that get better mileage. It should be a boost to struggling car dealers and anybody who wants a new compact or hybrid, I suppose. But what about what you might call --- "the clunker economy" -- businesses that depend on those old cars? Marketplace's Mitchell Hartman reports.
MITCHELL HARTMAN: Many charities count on donated cars as a steady revenue stream. I asked Stacy Palmer of the Chronicle of Philanthropy what happens if a quarter-million clunkers get traded in, instead?
Stacy PALMER: It definitely will be more difficult.
Though in fact Palmer says the flow of cars was running dry before "Cash For Clunkers" came along.
PALMER: Charities have already seen a drop-off in the number of cars being donated in the recession. People are still looking for ways for getting some kind of cash rather than the value of the charitable deduction.
So if charities won't benefit from this, maybe junkyards will. Michael Wilson stops me right there.
MICHAEL WILSON: We refer to it as the "j word."
Wilson's head of the Automotive Recyclers Association -- that's what auto salvagers like to be called these days. He says sure, his members will have plenty of old cars to strip down and sell. But...
WILSON: You've got vehicles that are out there in the marketplace already. When you get a mad rush of upwards of 150,000 vehicles over a couple-month period, you may already have that inventory on your shelves.
In other words, they may already have enough car parts on hand. So a lot of these vehicles may end up crushed for scrap metal. But there's a glut of that right now as well.
WILSON:The market really dropped off last October. They were getting about $300 a ton, and it's dropped back down to about $120.
So that means wreckers and scrap metal processors aren't likely to make off like bandits either.
Perhaps the biggest beneficiaries will be car makers and car dealers, which is the whole point of the exercise to begin with.
I'm Mitchell Hartman for Marketplace.
Why does the government want to spend good tax payer money to subsidize fuel efficient vehicles? It is foreseeable that the economy and the market will root out "clunkers" eventually. With gas prices soaring before the economy crashed, the demand for gas guzzlers had already plummeted. States have vehicle emission limits that regulate how much a vehicle is allowed to pollute. To solve the real problem, update these laws. This government should choose its causes more selectively and be more consistent in its policies. What is the point of "talking" about reducing the record federal deficit, just to turn around the next day and pass this "feel good" bill? This cash for clunkers plan is fiscally irresponsible. Is it also a political outrage. A domestic plan that is embedded into an Iraq and Afghanistan spending bill to ensure its approval ... when will the American public get a break?
Everyone is the loser in the "Cash for Clunkers" program. I sold cars for a few years and anytime a customer had a "clunker" it was due to the lack of good credit, no ability to increase down payment, and everyone that that person knew would not co-sign. So now the good ole government is dangling a carrot, excuse me car in the face of individuals who are better in the clunker then they will be when they have the car towed away after six-month of being unable to make the payments. Then you have the tax payers, in all economic levels being futher burdened with higher taxes to support this program. With the pre-owned market already flooded, any chance that the car had to be sold on the lot is gone. Then what about the wholesale-auction market that uses clunkers to help keep junk-yards open and operating. These jobs and industries are now in jepardy. Again, this is just another example of the government helping a every few at the expense of many.
Sounds like a great plan for a recent college graduate that drives a bomber and recently landed a good job. As noted above, the clunkers that you really want off the road are likely to be driven by those that can't get the credit to swing a new car.
Have you priced a new car lately?
I'm guessing one of the main reasons clunkers are out there is that the owners can't afford a new one. How many of those owners can afford or will qualify for an auto loan?
I'll bet a lot of people will try to trade that clunker in, go to a dealership, experience 'sticker shock' and go back home with their clunker.
