Cash For Clunkers

[FUEGO]

One of the problems that people seem to forget is that cars traveling on a road will 'wear' it out... (the trucks are MUCH worse)...

SO, if you only tax the gas (which pays for the roads) and I drive a gas hog, then I am paying more for that road then the guy in the Prius... yet the 'damage' to the road is the same if we have the same weight car and tires....

Lighter cars (which are typically more fuel efficient) cause proportionately less road damage per unit of fuel tax they pay in general. Road damage increases roughly exponentially to the fourth power as vehicle weight (per axle) increases. So a suburban with roughly double the axle weight of a passenger car actually does 16 times more damage to the road versus the passenger car, while only paying approximately twice the fuel tax (based on the suburban's mpgs about 2x the passenger car's).

In any event, pavement wear by passenger vehicles is almost rounding error when it comes to pavement design for high class roadway facilities since heavy trucks account for virtually all of the pavement wear due to loading.

My understanding of the clunker cash law is that they want to help the environment (get clunkers off the road and replace them with high mpg vehicles) and stimulate the economy (get people to buy more new cars).

 

[Kronk]

But it accomplishes their primary objective AND nets a revenue increase. Primary objective reduced consumption of gasoline and the associated CO2 released as a result of combustion, plus all the associated pollutants (CO, NOX, SOX, VOC, benzene, etc).

It also solves a secondary objective - the amorphous "reduced reliance on foreign oil" - whatever that means since we have a world market for oil.

FUEGO caught the gist of my post. If you don't look at a gas tax as a revenue stream, but merely as a driver (so to speak) of "better" behvaior (driving less or driving more efficient cars), then a gas tax works.

There are other problems associated with it. But, on the surface, it seems a much better solution than paying people to buy newer cars.

 

[TromboneAl]

So why isn't it being considered? I assume politicians just know that it's going to be very unpopular.

 

[FUEGO]

So why isn't it being considered? I assume politicians just know that it's going to be very unpopular.

I think that is the answer. It will be viewed as a punitive tax, and people are going to notice it every time they fill up the tank. And for the 50% of voters that make below the median wage, it is going to hurt the most.

Obviously they could take the regressive edge off of it by refunding a flat amount as a refundable tax credit (a la earned income credit) in a revenue neutral manner. But you still feel the pinch on the margins each time you fill up your tank. But the extra pain at the pump is the exact reason why it would be so effective.

In contrast, blowing a couple billion on this clunker law makes it look like they are really doing something good for the environment AND the economy while helping out millions of Americans. And racking up another few billion in debt in the process.

 

[Westernskies]

The Federal Government has only been in the car business a few weeks, and look what [-]bureaurocratic meddling in the free market [/-]exciting marketing programs they have already introduced!

Yep, lets's reward folks for buying only smaller cars; free choice, safety, and functionality certainly have nothing to do with most folks buying decisions. And the states certainly don't need the higher gas tax revenues that gas-guzzlers generate to pay for any of their own budget problems...

IMO, this is just another "feel-good" program (that we can ill-afford) that will have many unintended consequences; many good illustrations outlined above.

 

[HFWR]

Yep, lets's reward folks for buying only smaller cars; free choice, safety, and functionality certainly have nothing to do with most folks buying decisions.

While I agree with the sentiment, I would submit that the choice is not so "free". It is paid for by ever-increasing trade deficits, and by a continuous military presence in the Middle East.

 

[ziggy29]

While I agree with the sentiment, I would submit that the choice is not so "free". It is paid for by ever-increasing trade deficits, and by a continuous military presence in the Middle East.

So maybe the federal gas tax should be raised enough to pay for the additional costs of policing the Middle East?

 

[ERD50]

Well, this stinker passed:

washingtonpost.com

Of course, they rolled it in with some "support for our troops" bill, so next election they can say that "Congressman xyz voted against supplying needed equipment for our troops".

Just imagine the poor sap that sold his clunker a month ago. He missed out on $4500. If they are going to go for legislation like this, the least they could do is phase things in. Crazy that an 18 Mpg car qualifies for full amount, but a 19 Mpg nothing. You could have a simple formula or table for years and mpg (consumption actually) delta.

I even wrote my Congress people on this one. It feels so good to get an automated reply about how concerned they are.

-ERD50

 

[FUEGO]

Well, this stinker passed:

washingtonpost.com

Of course, they rolled it in with some "support for our troops" bill, so next election they can say that "Congressman xyz voted against supplying needed equipment for our troops".

The article says it is only valid through Nov 1. So if the old language remains requiring one to insure and have registered the car for a year, then no one can go out and buy a clunker today to take advantage of this deal. Unless they extend the bill.

 

[JPatrick]

The article says it is only valid through Nov 1. So if the old language remains requiring one to insure and have registered the car for a year, then no one can go out and buy a clunker today to take advantage of this deal. Unless they extend the bill.

Or until 1 billion is spent....

 

[HornedToad10]

Do you have to buy a "new" car or can it be a used one from the dealer?

Also, does anyone know what you need if you trade in an old SUV for a new car? I saw 5mpg for old suv for new suv and 10mpg for old car to new car, but didn't see anything for this case explicitly.... I'm assuming it needs to be 10mpg faster and the other clause of only needing 5mpg for old SUV/truck for new SUV/truck is just to help them sell.

 

[Texas Proud]

Almost sure it is a new car...

So, the first 200,000 plus people get a break.... I will have to start looking..

 

[clifp]

The article says it is only valid through Nov 1. So if the old language remains requiring one to insure and have registered the car for a year, then no one can go out and buy a clunker today to take advantage of this deal. Unless they extend the bill.

A bummer that it only last until Nov 1 and you have to own the car for a year. I was just scanning Craigslist. I figured it would be worth buying this gas guzzling beauty for $500 and moving up my planned car purchase up by 1 year.

Still there are obvious ways to game the system. Before you buy a new car, you find the owner of $500 clunker. You have the clunker owner buy the new car and get the rebate then you buy the car from him.

BTW the Senate just past the bill, attached to a war appropriation and it is off for Obama's signature. I guess they are going ship the clunkers over to Afghanistan?

 

[FUEGO]

Still there are obvious ways to game the system. Before you buy a new car, you find the owner of $500 clunker. You have the clunker owner buy the new car and get the rebate then you buy the car from him.

True enough. I guess I would have to still pay use/sales tax upon transfer of the vehicle title from my co-conspirator to me. And that would likely be another $500 or so. This deal keeps getting worse...

 

[Pete]

Just what America needs. Trade in perfectly good cars and go into more debt. All under the guise of being good for the environment and the economy. How much pollution is created while making a new car? How much further in debt do we have to get in order to save the economy? So silly.

 

[Ronstar]

I'm in the process of buying a truck. I currently have 2 jeeps - a 2004 Wrangler with 11000 miles in mint condition, and a 2000 Grand Cherokee with 145,000 miles in not so good condition. I can't make up my mind as to which one to get rid of, and if I should sell to an individual, something like Carmax, or if I should trade it in on the truck. The Wrangler is worth about 11k and the Grand Cherokee about 3.5k. Am I reading this bill correctly that the govt will pay $3500 or $4500 in addition to what the dealer sets as the trade-in value?

 

[clifp]

Am I reading this bill correctly that the govt will pay $3500 or $4500 in addition to what the dealer sets as the trade-in value?

My understanding is they are suppose to junk the clunker so it is instead of the trade in.

 

[JPatrick]

I'm in the process of buying a truck. I currently have 2 jeeps - a 2004 Wrangler with 11000 miles in mint condition, and a 2000 Grand Cherokee with 145,000 miles in not so good condition. I can't make up my mind as to which one to get rid of, and if I should sell to an individual, something like Carmax, or if I should trade it in on the truck. The Wrangler is worth about 11k and the Grand Cherokee about 3.5k. Am I reading this bill correctly that the govt will pay $3500 or $4500 in addition to what the dealer sets as the trade-in value?

You get $3500/$4500 regardless of value provided all the other criteria are met..If you trade a second vehicle in, that is between you and the dealer as to outcome.
If all goes well I will give him one clunker for the $4500 (a nice one at that) and one as a regular trade which may fetch $5000 (on a good day.)
Add to to that $2000 worth of credit card points and a haggled reduction and I may walk out of there in pretty good shape..Oh, and if they hurry, I also have a GM loyalty check for up to $2500, but I fear that one will expire before the deal is done.

 

[Notmuchlonger]

Bah mine misses out on the 18 mpg mark.

 

[Ronnieboy]

Bah mine misses out on the 18 mpg mark.

My son's barely misses too, according to the EPA it gets a combined 19MPG instead of the 18. He was actually waiting to buy a new Honda Fit until this bill was signed.

Oh well, I suggested he just keep the car and save his money

 

[BUM]

This all makes good gummint sense, meaning it makes little sense at all. Taking it full circle - what happens to all those $500 clunkers, whose value has been artificially inflated? Think they will all be taken off the road? Get ready for used car lots everywhere full of pricey rusted Buicks and Cadillacs.

 

[UncleHoney]

I just wonder if anyone in Congress did their homework before going off on the Cash for Clunkers tangent? On the surface it might look attractive for boosting car sales but so far I haven't seen the market research data to support the thinking.

A billion bucks could stimulate car sales between 220000 and 290000 units over the life of the plan. All you gotta do is find the people with the money and it's a done deal, maybe.

Just how many people are going to go out on the debt limb for a new buggy these days is anyone's guess. A new car financed for five years is probably going cost over $400 a month in payments. Are the banks going to be loaning the money?

If people are as cash strapped as the media says I think the whole plan will fall flat with few takers. Just a little worry in the mind of the average Joe with a mortgage that is underwater, a current auto loan that is underwater and a questionable employment future may just make the whole plan wash up on the beach.

Is there really any data or is this just another pipe dream from congress?

 

[FUEGO]

This law is kind of funny. I could bring in a 1996 ford explorer that gets 14 mpg and trade it in for another car that gets 18 mpg (still a clunker) and claim my $3500 credit.

My latest thinking is that I may be able to structure the deal in such a manner as to avoid needing to transfer title after the purchase of the new vehicle. My parents have a qualifying clunker, so I was thinking I could have the new car titled jointly in their names and my name. That defeats the minimum 1 year ownership requirement and gets me a new car without paying the use tax upon transfer of the vehicle. It also avoids potential problems with transferring the warranty on a new car purchase.

 

[Payin-the-Toll]

The article in my newspaper says only for years 1984 and newer. So the value of my junky 1966 Ford pick-up truck which I've kept plated and insured just went from $4500 to $0---bummer!

 

[clifp]

This law is kind of funny. I could bring in a 1996 ford explorer that gets 14 mpg and trade it in for another car that gets 18 mpg (still a clunker) and claim my $3500 credit.

My latest thinking is that I may be able to structure the deal in such a manner as to avoid needing to transfer title after the purchase of the new vehicle. My parents have a qualifying clunker, so I was thinking I could have the new car titled jointly in their names and my name. That defeats the minimum 1 year ownership requirement and gets me a new car without paying the use tax upon transfer of the vehicle. It also avoids potential problems with transferring the warranty on a new car purchase.

My Craigslist scheme is probably too risky/complicated. However, using friends and family as intermediary is probably perfectly doable. I know my BIL purchased cars in Oregon, and registered them to the family's vacation mobile home to avoid paying the California sales taxes. It wasn't a complete scam because the cars did spend several month to year in Oregon before relocating to CA. This was save $1,000 - $1,500 in taxes. For $4,5000 I think poeple will jump through hoops. Probably with the help of auto dealers.

In rural parts of the country, I know a lot of couples have a rarely used old pick up truck. I think these are prime trade in vehicles. I know my Dad probably drove his 10 MPG Chevy pick up truck 2,000 a year. I really question how many new car purchase will be stimulated by this bill and how many gallons of gas we will save.

A friend of my said their are worse way to spend the stimulus and I suppose he is right.