Cash For Clunkers

[ERD50]

I wonder why I/we are analyzing this as though it has some rational purpose that can be identified by looking at the result. This is, after all, (proposed) legislation. It would be like trying to identify the higher thoughts of a pig by looking at a sausage.

Exactly.

Most of the energy conservation legislation is written this way. My simple tests is:

A) Can you measure the results, to determine if the program is effective? Corollary - are the results reasonably predictable.

B) Does the program provide reasonable "bang for the buck"? Or would other programs provide more gas savings with less govt (taxpayer - you & me) money spent?

If you fail A, you can't answer B.

And this fails the test. It is pretty tough to know how much gas will be saved. 1mpg is a small diff, and some of these people may drive more miles, now that they have a shiny new vehicle with better mileage. And how much savings per $ can we expect?

Trying to modify behavior isn't that different from trying to improve a design or process in the laboratory. You analyze the problem, develop some potential solutions based on your knowledge of how these things work (supply/demand curve, behavioral science studies, etc). You test, or model the most promising ones, and analyze the results. You evaluate the cost effectiveness, and chose.

It isn't rocket science, but it is basic logical process. Looks like the govt just wants headlines so they can claim they are "doing something". If this passes, someone will brag, "we took X million old clunkers off the road....", but what was the benefit?


Also, any comparisons to pigs and/or sausage is an undeserving slam against pigs and/or sausage makers. Leave them out of this!

If I have time later, I'll start a new thread on CFLs - there is some new info out there....

-ERD50

 

[TromboneAl]

I agree with all these criticisms, including my own.

But perhaps, together with a probably-coming-soon increase in gas prices, this could have an impact.

The people driving around in rusty Monte Carlos might go for this in a big way.

ERD50, I seem to remember that you had a convincing argument that it made more sense to get rid of the 15 MPG cars and replace them with 25-30 MPG cars than to replace the 30 MPG cars with 100 MPG vehicles?

 

[FinanceDude]

John, from what I have heard, the money goes directly to the dealer.
I am not sure if the dealers will discount the rebate up front, or pass it along once they get it.

If you don't demand they do, it becomes an instant moneymaker for them. I remember a local dealer who was big on the $3500 push pull or drag sales. The DAY BEFORE the sale started, they would make up all new window stickers on their used cars that were $3000 higher than before..........

 

[FUEGO]

I'd wait until we see what finally emerges.

And that "No additional fees" language is a hoot. Have these legislators never bought a car? How is a customer going to know if he was charged an "extra fee?" Even if a customer waits until the end to ambush the dealer, he could suddenly discover that the car the customer wanted was "just sold by another salesman," but luckily he has another, even nicer car, with some special undercoating and much nicer wheels. "With your rebate for the clunker, you're still saving a lot of money and getting a better car."

You can always threaten to report them for violating the act. Violation carries a $15000 civil penalty.

In any event, I would walk if they won't take the deal. There's always someone else looking to make a sale.

 

[FinanceDude]

You can always threaten to report them for violating the act. Violation carries a $15000 civil penalty.

In any event, I would walk if they won't take the deal. There's always someone else looking to make a sale.

I would wait until the details are worked out. An educated consumer always wins..........

 

[ERD50]

ERD50, I seem to remember that you had a convincing argument that it made more sense to get rid of the 15 MPG cars and replace them with 25-30 MPG cars than to replace the 30 MPG cars with 100 MPG vehicles?

Yes, but I would not call it a "convincing argument" any more than I would say that someone pointing out that 2 + 2 = 4 made a "convincing argument". It is just math, and the math of mpg is misleading in terms of gas savings.

10 mpg and 10,000 miles driven = 1,000 gallons used.
20 mpg and 10,000 miles driven = 500 gallons used.

So 500 gallons saved by "doubling" the mpg rating from 10 to 20mpg.



30 mpg and 10,000 miles driven = 333.3 gallons used.
90 mpg and 10,000 miles driven = 111.1 gallons used.

So only 222.2 gallons saved by "tripling" the mpg rating from 30 to 90mpg.


Even an EPA rep was talking about how mpg stickers should be replaced by "gallons used per thousand miles" stickers. The savings are much easier to compare. Just multiply by the thousands of miles driven - they could even put a line to show gallons at typical range of miles driven to make it completely obvious.

But that is the issue - the govt is not addressing "gallons of gas used", they are addressing indirect things like mpg. MPG does not factor in miles driven, carpooling, cautious driving, telecommuting, combining trips, public transportation, etc, etc.

I'm starting to think that Federal govt spending should need to be approved by Referendum by those who pay Federal taxes. If "No taxation w/o Representation" was a founding theme of this country, then I think there is some merit to the corollary, "No Federal spending approved by those who did not contribute". I should be able to represent my Federal contribution, I'm not so sure that someone who did not contribute should have equal say.

I agree with all these criticisms, including my own.

But perhaps, together with a probably-coming-soon increase in gas prices, this could have an impact.

The people driving around in rusty Monte Carlos might go for this in a big way.

It might have some impact. That impact might be negative. But if it isn't the best use of funds (or at least reasonably good) to achieve the goal, it isn't good policy.

Could it be negative? I think it could - How much oil does it take to make a new car? Maybe those old cars are being used for low mileage uses like commuting to a train station, or a second/third 'backup' vehicle? The gas savings could be offset by the early retiring of an asset with a still useful life. In fact, I've done the math on some of my appliances - no way am I going to replace a working unit with a marginally more efficient one. It seldom makes sense (it did for people with high heat bills and an old 55% eff furnace to upgrade to a 85% plus eff unit, but those opps are rare).

While I'm on a rant here, another thing really bugging me is the medias constant description of electric and fuel cell cars as "zero pollution". Those cars *move* the pollution to the electrical power plant (pay no attention to that mountain that used to be there before we stripped it for coal). It can be a net win, but sure is not "zero pollution". I guess I could pump my sewage into my neighbor's yard, and then claim I don't have a sewage waste disposal problem? Maybe I could get a Nobel Prize for that kind of thinking?

-ERD50

 

[FinanceDude]

I'd wait until we see what finally emerges.

And that "No additional fees" language is a hoot. Have these legislators never bought a car? How is a customer going to know if he was charged an "extra fee?" Even if a customer waits until the end to ambush the dealer, he could suddenly discover that the car the customer wanted was "just sold by another salesman," but luckily he has another, even nicer car, with some special undercoating and much nicer wheels. "With your rebate for the clunker, you're still saving a lot of money and getting a better car."

Keep in mind that dealers can always trade another dealer for the car you want, or go to another dealer. I think these days, dealers are desperate for sales to keep the doors open..........

 

[FinanceDude]

While I'm on a rant here, another thing really bugging me is the medias constant description of electric and fuel cell cars as "zero pollution". Those cars *move* the pollution to the electrical power plant (pay no attention to that mountain that used to be there before we stripped it for coal). It can be a net win, but sure is not "zero pollution". I guess I could pump my sewage into my neighbor's yard, and then claim I don't have a sewage waste disposal problem? Maybe I could get a Nobel Prize for that kind of thinking?-ERD50

Interesting that Toyota has never commented on the huge "dead zone" created outside the plant that makes hybrid batteries for the Prius. Environmental groups from all over the globe have come there to do studies. Literally NOTHING gorws there, it is devoid of life. I suppose because its in a country other than the US, it's not news.........

 

[FUEGO]

Interesting that Toyota has never commented on the huge "dead zone" created outside the plant that makes hybrid batteries for the Prius. Environmental groups from all over the globe have come there to do studies. Literally NOTHING gorws there, it is devoid of life. I suppose because its in a country other than the US, it's not news.........

It's not a big deal in the US. We have Superfund to clean up any environmental mess. It is free and provided by the government. They are here to help us.

 

[John Galt III]

There is language in the law to essentially disallow dealers to charge additional fees for those using the vouchers.

See section (c)(1)(F):
"NO ADDITIONAL FEES- A dealer participating in the program may not charge a person purchasing or leasing a new fuel efficient automobile any additional fees associated with the use of a voucher under the Program."

Violation of the act carries a $15,000 civil penalty.

I'd use the ambush tactic: negotiate the price, get the final papers out for signature, then say oh, by the way, I'd like to trade in this clunker and get that $4,500 credit applied to the purchase price while I'm at it.

On a different note, I have entered negotiations to buy a 1986 station wagon from my parents that gets 17 mpg. And runs. The 2009 honda civic (the likely new car) gets 29 mpg. Sweet! May have to pick up another clunker for my wife so she can get a new car too for ~$3500 off. Good ole uncle sam's generosity.

The no additional fees clause is great, but that won't prevent the dealer from scaling back all the incentives that he has, like the $2,000 discount from the manufacturer, or the $500 to $1000 hit the dealer may have taken on a non-Uncle Sam deal. The dealer would say something like "Well, our policy is to only give a $500 dealer discount and only a $1000 manufacturer discount for those folks using the government rebate".

It's not a "fee" to scale back the discounts, although I would term it an implicit "penalty" for using the government rebate, if the dealer does this.

The ambush tactic is a possibility, but I think the dealer would just whip out the "Oh, gosh, I'm sorry, it's our policy to ..... blah, blah, blah " and want to change the deal.

 

[ziggy29]

The ambush tactic is a possibility, but I think the dealer would just whip out the "Oh, gosh, I'm sorry, it's our policy to ..... blah, blah, blah " and want to change the deal.

In such a case, the consumer needs to make it clear that it's their policy to walk away.

 

[FUEGO]

In such a case, the consumer needs to make it clear that it's their policy to walk away.

Definitely. I would let my feet do the talking.

Although I would probably fax/email out specifications to 10 dealers for quotes and go and negotiate with the top couple of places.

 

[M Paquette]

Interesting that Toyota has never commented on the huge "dead zone" created outside the plant that makes hybrid batteries for the Prius. Environmental groups from all over the globe have come there to do studies. Literally NOTHING gorws there, it is devoid of life. I suppose because its in a country other than the US, it's not news.........

You're probably referring to the Sudbury, Ontario nickel smelting plant.

The Sudbury Basin is the site of the second largest known meteor crater (astrobleme) on Earth, and the magma upwelling (Sudbury Igneous Complex) produced mineral deposits that currently make this one of the world's largest suppliers of nickel and copper ores. Mining and smelting has been going on here since 1883. Open pit smelting starting in the 1880s destroyed much of the area's plant life that remained after heavy logging, leading to massive soil erosion.

Major miners involved are INCO and Falconbridge. The INCO SuperStack project (a 1234 foot smokestack!) built in 1972 shifted the ground level air pollution that destroyed plant life to a high altitude dispersed cloud. While the local area benefited, lakes in the larger area quickly became more acid from the dissolved sulphur dioxide in area rainfall.

Scrubbing equipment was finally added in 1994, and sulphur dioxide emissions dropped by a factor of 10. Conditions in the Sudbury area are greatly improved these days.

Blaming the Toyota Prius for damage produced primarily from 1883 to 1972 by world demand for nickel, dominated by the stainless steel industry (70% of all nickel mined) strikes me as disingenuous at best.

I'd blame all the folks using stainless steel tanks, pipes, fittings, and of course, homeowners with Evil stainless steel sinks containing deadly, deadly nickel. Oh, and camera batteries. Nickel-metal hydride batteries as found in the Prius and other electrical systems account for only a minute amount of the nickel mined. There's more nickel in the exhaust system of a sports car such as the BMW M3 than in the Prius battery.

 

[JPatrick]

Here's the bill:

Search Results - THOMAS (Library of Congress)

Excerpt:

...the eligible trade-in vehicle is a category 2 truck and the combined fuel economy value of the new fuel efficient automobile is at least 1 mile per gallon higher than the combined fuel economy value of the eligible trade-in vehicle; or...

1 MPG difference. La di frickin da.

The 1 mile provision likely will not survive the senate.
The draft house bill had much greater mileage requirements, but word was that Diane Fienstien in the senate was going to insist on still higher requirements that would have everyone lining up for Smart cars, which of course would not happen, thus killing the program.
My guess is that the house dropped their mileage to the silly zone so as to allow Diane to goose it up to where the house originally was, thus appearing to be ...well whatever...I'm on thin ice here.
Ultimately yielding a sensible bill.

 

[Dreamer]

I am definitely keeping my eye on this. DH has a 1999 Dodge Durango that we would love to get rid of and get something more fuel efficient. The trick is for him to agree to something more fuel efficient. I started watching our expenses 5/13/09 and from 5/13 through 6/7/09, we have spent $352.29 on gasoline. I am retired and DH works less than 5 miles from our house. It is the season for him to drive his corvette with the 454 big block though. It is pretty much his only hobby now. We both made trips to Silver Spring MD to help DD move back home, while her DH is in TX for 3 mos training.

 

[Ronstar]

i have my Jeep Wrangler ready to go,but I want to trade it on a 4x4 Ford Pickup. We'll see how this goes.

 

[ERD50]

Man is this twisted

I reflected on this while eating my oatmeal, skim milk, almonds and fruit for breakfast.

The next step is that the govt decides that more people should be eating healthy breakfasts. So, if you have been eating junk, or skipping breakfast, you will get a voucher to have a personal chef come in and prepare a wonderful healthy meal to encourage you to eat right.

But, if like me, you already were eating right (or driving a reasonably high mpg car), you get nothing.

That seems to be the direction this is taking.

-ERD50

edit/add - I just realized that might be taken the wrong way - I have NO issue with people deciding to take advantage of the offer. You play the game according to the rules (which is the intent of the offer). My problem is with it being offered.

 

[Texas Proud]

Man is this twisted

I reflected on this while eating my oatmeal, skim milk, almonds and fruit for breakfast.

The next step is that the govt decides that more people should be eating healthy breakfasts. So, if you have been eating junk, or skipping breakfast, you will get a voucher to have a personal chef come in and prepare a wonderful healthy meal to encourage you to eat right.

But, if like me, you already were eating right (or driving a reasonably high mpg car), you get nothing.

That seems to be the direction this is taking.

-ERD50

edit/add - I just realized that might be taken the wrong way - I have NO issue with people deciding to take advantage of the offer. You play the game according to the rules (which is the intent of the offer). My problem is with it being offered.

Hey.... it is just some advertising for 'their' car companies... got to get sales up somehow...


Take it from another side.... I have an 18 mpg car bought 15 years ago... there were not many cars that got 'great' gas mileage that I was interested in at the time... I have NO incentive to get rid of it as it works just fine... getting me to and from work.. it is in great shape, just burn a quart of oil about every 2K miles...

Now, muliply that by 1 million (the number of cars that would be bought if this goes through)...

What am I going to do?? Probably buy a 24 to 28 mpg car... if most of the people does this it will actually save a small about of oil... and produce fewer emissions...

And it will be a better stimulus plan than almost all of the ones they have started... this will actually get people to buy stuff... and require them to put up their own money...

 

[FUEGO]

It is too bad there is no way to make the price of gas more expensive somehow so that people are encouraged to conserve fuel to a greater extent. Apparently $4 a gallon is the threshold where people pay attention.

 

[FinanceDude]

You're probably referring to the Sudbury, Ontario nickel smelting plant.

The Sudbury Basin is the site of the second largest known meteor crater (astrobleme) on Earth, and the magma upwelling (Sudbury Igneous Complex) produced mineral deposits that currently make this one of the world's largest suppliers of nickel and copper ores. Mining and smelting has been going on here since 1883. Open pit smelting starting in the 1880s destroyed much of the area's plant life that remained after heavy logging, leading to massive soil erosion.

Major miners involved are INCO and Falconbridge. The INCO SuperStack project (a 1234 foot smokestack!) built in 1972 shifted the ground level air pollution that destroyed plant life to a high altitude dispersed cloud. While the local area benefited, lakes in the larger area quickly became more acid from the dissolved sulphur dioxide in area rainfall.

Scrubbing equipment was finally added in 1994, and sulphur dioxide emissions dropped by a factor of 10. Conditions in the Sudbury area are greatly improved these days.

Blaming the Toyota Prius for damage produced primarily from 1883 to 1972 by world demand for nickel, dominated by the stainless steel industry (70% of all nickel mined) strikes me as disingenuous at best.

I'd blame all the folks using stainless steel tanks, pipes, fittings, and of course, homeowners with Evil stainless steel sinks containing deadly, deadly nickel. Oh, and camera batteries. Nickel-metal hydride batteries as found in the Prius and other electrical systems account for only a minute amount of the nickel mined. There's more nickel in the exhaust system of a sports car such as the BMW M3 than in the Prius battery.

The basis of my point is that looking at the NET effect of a Prius, it costs more to run than most other vehicles, even the hulking SUVs. You may NEVER reclaim the outlay of costs.......

 

[ERD50]

And it will be a better stimulus plan than almost all of the ones they have started... this will actually get people to buy stuff... and require them to put up their own money...

I agree that it may achieve those results. But I still think it is a "twisted" and selective way to go about it.

Is there any way to measure the cost/benefit? That is a red flag to me.

How much is it "worth" to us to have the US use less gasoline? US cars are already the cleanest on the planet (that is one reason a lot of those high mpg Euro cars are not imported).

And, as samclem pointed out in another thread, if we use less gasoline, that means there is more on the world market, keeping prices relatively lower than they would be otherwise. Unless the laws of supply/demand have been repealed, that means relatively more consumption by the rest of the world. And a lot of the "rest of the world" has pollution standards that are lax compared to US. I don't have time to look it up, but it would not surprise me if the "rest of the world" average pollution produced froma gallon of gas was several (maybe hundreds) of times worse than a US car, even a 10 YO one.

The EPA regs reduced some emissions by hundreds and even thousands of times over unregulated vehicles. It ain't small potatoes.

-ERD50

 

[FUEGO]

How much is it "worth" to us to have the US use less gasoline? US cars are already the cleanest on the planet (that is one reason a lot of those high mpg Euro cars are not imported).

What is it worth to save a gallon of gas? $4.20 per gallon.

Take Texas Pride's example of a 15 y.o. car. Assume 5 more years of useful life before it hits the scrapyard. Let's say he's average and drives 12,000 miles/year or 60,000 miles in 5 years. At 18 mpg he burns 3,333 gallons to drive 60k miles. He's clever, he trades in his old car for a new one that gets 24 mpg, or 6 miles per gallon better. Since it is only a 6 mpg improvement, he gets the $3500 credit instead of the $4500 credit (unless this is a truck replacement we are talking about - haven't researched rules on that). At 24 mpg, one consumes 2500 gallons of gas to drive 60k miles. That is a net savings of 833 gallons over 5 years. Or $4.20 per gallon the taxpayer is paying.

Also factor in all the people who have an old beater sitting in their backyard that they only drive to home depot, use to haul garbage, or to go fishing once a month. Virtually no reduction in gasoline consumption. We may end up paying $30 or more to avoid burning a gallon of gas.

Of course all the variables can change and it may actually cost more or less to "save" a gallon of gas. The bottom line is that this program seems to be a rather expensive way to reduce gasoline consumption.

 

[Texas Proud]

Of course all the variables can change and it may actually cost more or less to "save" a gallon of gas. The bottom line is that this program seems to be a rather expensive way to reduce gasoline consumption.

But that is my point.. it is not a program to reduce gas consumption (even though that is what some are touting)..... it is a stimulus package, just like the bridges and highways and byways and schools that they are spending almost $800 billion on... but this program requires a big 'matching' by the local entity (being ME if I do it)... the other probably does not require any match or very little...

Is it a great plan I do not know, but I think some of the other spending programs are much worse... take ethanol... now there is a program that cost a lot with little to no benefit...


HEY, there is an idea.... drop the ethanol subsidy and make it a high mileage car subsidy...

 

[ERD50]

What is it worth to save a gallon of gas? $4.20 per gallon.

.... We may end up paying $30 or more to avoid burning a gallon of gas

...The bottom line is that this program seems to be a rather expensive way to reduce gasoline consumption.

Excellent analysis FUEGO. Thanks.

But that is my point.. it is not a program to reduce gas consumption (even though that is what some are touting)..... it is a stimulus package, ....

Well, if we ignore the claims that it is about mpg, I'd still say it's a lousy way to stimulate the economy. If we want people to buy cars, why limit it to the people who have old gas hogs? I'm about ready to replace some cars, but I don't have any old gas hogs - why don't I get some bucks to push me over the edge? Would my dollars stimulate the economy less than someone who previously bought a gas hog? I don't get it.

Is it a great plan I do not know, but I think some of the other spending programs are much worse...

Ok, we can agree there. I would *never* underestimate the ability of Congress to come up with even worse legislation I doubt that the Prez will tout this in an address saying "But it's not as bad as some bills we have passed!".

-ERD50

 

[bhoferp]

I thought for sure that I am driving a clunker, a 1991 Dodge Spirit, but alas, the combined mpg is 19, so it doesn't qualify. Surprisingly, our 2001 Ford Ranger is a clunker. However, the average trade-in value for it is around $5800. Since part of the cash for clunkers deal is that the dealers will junk most parts of the trade-ins (wonder how that will be monitored?), the maximum cash for clunkers deal would be less than just average trade-in. Guess I'll just keep on driving clunkers for now. Don't really want a monthly car payment anyway.