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Did I here a clunk?

November 5 2009 at 4:29 PM


Is Obama's 'cash-for-clunkers' program to blame for the dramatic rise in used car prices?

The auto world was cheered by yesterday's news that new car demand continues to increase, with several major automakers reporting higher sales compared with a year ago. But as new car prices rise, buyers aren't going to find as much relief as usual buying used cars.

Used car prices are up 16% from a year ago, better than three times the usual 4.6% annual increase, reports. The reason is simple supply and demand. With fewer new cars being sold, dealers are getting fewer trade-ins. Also, rental car and government fleets have dramatically reduced their new car purchases, a prime source of fresh used cars when they are cast out after a year or two of service. But it appears that cash for clunkers may also have played a role in boosting prices out of reach of many Americans who need cheap, reliable transportation to weather high unemployment and a weak economy.

The government cash-for-clunkers program's provision that all the 678,024 gas guzzlers brought in to be traded for new vehicles be destroyed could be another key factor. Edmunds notes that the highest used car price appreciation has come in some of the cars that were the biggest targets of the clunkers program -- pickups, up 26.2%, and midsize SUVs, up 25.4%. Even the prices of used minivans -- a segment that many believe is out of fashion now that there are so many crossover choices -- were up 27.1%. By contrast, compact car prices rose only 13.5% and midsize car prices fell a tiny bit. It already has been an expensive outing for taxpayers:

The program, which cost nearly $3 billion in taxpayer funds, gave incentives of up to $4,500 for people who traded in old, inefficient vehicles for gas-thrifty new ones.

Used car dealers predicted just this scenario when they were griping over the summer about the provision of the law that required cars turned in to be destroyed, many with relatively low miles on the odometer. "It's going to drive prices up of some of the most affordable vehicles we have on the road," said Kelley Blue Book analyst Alec Gutierrez at the time. And that hurts the families most desperate for cheap, reliable transportation. "Those are the cars that lower-income families need," says Geoff Smartt, owner of Smartt Cars in Caldwell, Idaho, when we interviewed him in August.

As a stimulus program, clunkers seemed popular for its transparency and among people who got a new car using the government's subsidize discount and for local car dealers who badly needed a sale. But higher used car prices could be its legacy.

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The program failed on many levels. Here's another:

November 5 2009, 5:17 PM 

Uncle Sam Got Suckered

By David N. Bass on 11.5.09 @ 1:30PM

The $3 billion cash for clunkers program has been one of the most popular parts of the Obama administration's assorted (de)-stimulus efforts. Well, a new AP analysis shows that, true to form, the program didn't exactly accomplish its mission with flying colors.

Remember the so-called environmental benefits cash for clunkers would produce by taking gas-guzzlers off the road? Looks like many Americans turned in their cars for models that have comparable or even worse fuel economy for example, an old Ford F150 pickup truck for a new one.

Given the program's goals, I would call that fraud.

The AP reports:

The single most common swap -- which occurred more than 8,200 times -- involved Ford F150 pickup owners who took advantage of a government rebate to trade their old trucks for new Ford F150s. They were 17 times more likely to buy a new F150 than, say, a Toyota Prius.

The fuel economy for the new trucks ranged from 15 mpg to 17 mpg based on engine size and other factors, an improvement of just 1 mpg to 3 mpg over the clunkers.

Owners of thousands more large, old Chevrolet and Dodge pickups bought new Silverado and Ram trucks, also with only barely improved mileage in the middle teens, according to AP's analysis of sales of $15.2 billion worth of vehicles at nearly 19,000 car dealerships in every state. Those deals helped the Ford F150 and Chevy Silverado -- along with Ford's Escape midsize SUV -- climb into the Top 10 most-popular vehicles purchased with the government rebates. The most common truck-for-truck and truck-for-SUV deals totaled at least $911 million.

In scores of deals, the government reported spending a total of $562,500 in rebates for new cars and trucks that got worse or the same mileage as the trade-ins -- in apparent violation of the program's requirements. The government said it is investigating those reports and said in some cases they were probably entered incorrectly by dealers or based on outdated fuel economy figures.

Whew! I can sleep better at night knowing the feds are going to devote more taxpayer dollars to covering up the trail err, I mean investigating fraud and abuse.

Now, who's up for the federal government controlling our health-care system?

Source: American Spectator

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58% of those who traded in US cars bought foreign ones

November 10 2009, 10:09 AM 

I'm sure the japanese appreciated the stimulus

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