We stand corrected. The Cash for Clunkers program appears to be a huge success. Some have even touted it as one of the most successful stimulus programs of this recession. We felt from a true economic perspective, the program would only appeal to a small number of buyers. Instead, people who didn’t even qualify for the Cash for Clunkers program have showed up in dealer’s showrooms anyway.
Yet still, not everyone agrees the program is a good one. Consider this post that makes several arguments against Cash for Clunkers. First, the fact that old cars get destroyed (as opposed to having parts recycled) harm automotive recyclers. According to this article from the Associated Press, engines and drive trains account for 60% of a recycler’s revenues. But taking the argument one step further, it’s actually quite anti-green as destroying those old parts (as opposed to actually recycling) means that new parts have to be produced for replacements and/or the cost of the parts remaining increases for those who least can afford to pay (the program calls for the engines to be destroyed via a solution that must get poured into the old car’s engine and therefore, not recycled).
And this article analyzes the number of trade-ins that would have occurred anyway (200,000 every three months) vs. the program (222,000 or 286,000) according to Edmunds.com. The linked article above article specifically examines the cost of the program to the taxpayer in connection with the marginal increase in the number of cars traded in. When examined in this context, the author argues that each car costs the US taxpayer either $45,354 or $11,628, depending on the exact number of rebates at the $4500 amount vs. the $3500 amount.
One comment from a different article also makes an interesting point. If a home builder wants to sell a new home, he has to lower his price to compete with foreclosed home sales. But when a car company wants to sell a car, he no longer needs to pay attention to repossession sales to justify retail prices. Isn’t this a double-bail out for the car-makers?
And what about donating your car to charity? We received a note from a reader who suggested that another alternative to the Cash for Clunkers program is to donate a car to charity. If you are interested in that option, check out this website: for more information.
Maybe I’m a sore loser. I’m happy that any demand has been stimulated. But it’s not the most green policy (ironically) and will continue to harm those who can least afford a new car not to mention the cost to the US taxpayer and additional debt born by our government.
–Lisa Reisman
