Cash For Clunkers

[Martha]

The basic premise is right on. But the math doesn't necessarily add up to the extent they claim. They say it doesn't necessarily make sense financially to trade in a gas hog and buy a new car, but it might actually be close to break even financially. Take an old 1980's beater that barely runs with a trade in value equal to it's scrap value. It's out of tune and gets 13 mpg. You drive an average of 1,000 miles a month. The replacement car you buy gets 30 mpg. If your new car can be obtained for $11,000 after the $4500 credit (and there are plenty of domestic and foreign alternatives available at this price and in this economy), then you are looking at car payments of $200 a month for 5 years at 4% interest. You are saving $113 a month in fuel expenses, plus paying $200 more on the loan, plus a little more for insurance and property taxes. But you will avoid a lot of maintenance expenses on your new car. And after five years, you have a five year old car you own free and clear with much lower operating costs than your old gas hog clunker.

So unless you are absolutely destitute or need the large amounts of space that many clunkers provide, you may be better off long term by buying a new car.

I know people with junky old clunker who owe on the vehicles. They bought them used and are either paying the seller payments or their credit union. Won't help them a lot either.

 

[FUEGO]

I know people with junky old clunker who owe on the vehicles. They bought them used and are either paying the seller payments or their credit union. Won't help them a lot either.

They would fall in the "destitute" class of people!

This bill only helps the middle class folks who have enough cash or good enough credit (and income) to qualify to buy a new car. I think the primary intent is to prop up failing domestic auto companies, not help the economy overall or help the environment.

 

[Texas Proud]

One of the things that I find interesting is the truck provisions....

I got an old car I can trade in....

I can go buy an Accord or Camry... and get $3,500...

OR, I can go buy a RAV4 or CRV and get $4,500...

 

[ERD50]

I keep thinking about these two earlier posts, so I ran some numbers:

Originally Posted by Texas Proud
http://www.early-retirement.org/forums/showpost.php?p=825095&postcount=48

Originally Posted by FUEGO
http://www.early-retirement.org/forums/showpost.php?p=825058&postcount=47

FUEGO gave some examples where the costs might fall in a rough range of $4 to over $30 per gallon saved, Texas Proud mentioned (paraphrasing) that it's really a stimulus bill with mpg talk for some fog. So, can we put a cost to the stimulus portion? Let's look at jobs "saved":

I found a few links that gave a range of ~ 32-35 hours of labor in each vehicle for the D3. That appears to be internal to the car company, I don't think it includes the labor in the suppliers of components, but let's start there.

ISA | Plant efficiency leader in North America: Toyota


Let's use the middle of the $3,500 and $4,500 cash payment. Let's round the production hours up to 40 hours to be generous and assume a worker works 48 weeks per year. So it would take 48 cars cashed in to represent one "job for a year". And 48 * $4,000 = $192,000.

$192,000 to preserve a job for a year? And even that understates it, I think. That person would have bought a car eventually, so we paid $192,000 to move up the demand for a job by a few years.... maybe. And of course, loose it again a few years later. It is a shift, not a job "saved".

$192,000? Is that a reasonable cost/benefit ratio? Is $4-$30 to save a gallon of gas really the best we could do?

And these are the same people that are going to contain costs on health care?


-ERD50

 

[Texas Proud]

$192,000 to preserve a job for a year? And even that understates it, I think. That person would have bought a car eventually, so we paid $192,000 to move up the demand for a job by a few years.... maybe. And of course, loose it again a few years later. It is a shift, not a job "saved".

I would say that this is a better spend than the $700 plus billion stimulus package... this one requires that something is being purchased by someone other than the gvmt.... yes, they participate, but the other package is 100% gvmt spending...

I doubt very seriously that there are only 40 hours of labor to build a car when you do take into account all the parts being manufactored... and the overhead (accounting, design, etc... the truck driver to get it to the dealership... and the dealerships employees)...

I will probably participate.... but even if I did not, I like this better than bridge building and road construction that is not needed...