Friday, August 21, 2009

Cash for Clunkers is a Clunker.

Thank God the cash for clunkers deal is over. A bit of misnomer if you ask me since cash wasn't given to the owner of the clunkers, but the dealer that took them in for trade ins. Obama is calling it a huge success, but I'm not convinced because, 1, it would be super easy to commit fraud, 2, so far only the GM and Chrysler's dealers are getting paid, and 3, not all Clunkers are created equal.

First, lets take the fraud. There are all too many ways this could be taken advantage of, but I will focus on just two of them, one by the consumer, and another by the dealer. The consumer, if he's really smart about it, will just get a piece of junk that's abandoned or being given away, or really at a discounted price, go to a dealer, get a car or two, wait a year, and then sell them for more than he paid for them. Ok, that is legal, but not what the intent was because once he sell those cars, what will he drive afterwards? Yeap, another clunker. As for the dealers, and this is what I fear we may hear about especially when 2010 elections are coming close, is that dealers took used cars off their lots, used them as so called trade ins and buy new cars but put them on the used lots for about 3 to 4 thousand dollars below retail and pocket the difference. This is downright fraud, but since the government was really looking, what's to kept the dealers from such activity. Especially since car sales were in hell til this came up. Also, with BO's UAW buddies getting a boom from the sales, is he really going to care how?

Speaking of his union buddies, what's coming out right now is that many dealerships, mainly Toyota and Honda, aren't getting their payments. The administration is using the excuse of backlogs and improper paperwork as the reason why. Given Crazy Barry's reputation and action so far, I find it skeptical that this is not by design. GM and Chrysler aren't complaining, and they had the fewest sales during the program really discrediting BO's assertion that this just saved GM. It may gave GM some sales, but so far it's at the expense of Honda and Toyota. Since these are Government Motors biggest competitor, does it make sense that the government would pay them. That's like Mal Mart being paid by Target for Wal Mart's sales. This whole thing reeks and reeks badly.

The 3rd item that I doubt anyone has given much thought about is not all clunkers are equal nor are all new cars. I currently own two vehicles: a 2006 Ford Focus I got used in 2007 and a 93 Geo Metro that's registered non-0p because I'm keeping when my wife gets her license so we have vehicles when we have to be at different places, like work. My Geo gets 36 miles to a gallon even at its age. My Focus gets about 32. If I had traded it in, I would be getting 4 miles less and be $4500 less in the hole while Ford would be $4500 more in the hole. Many of the clunkers are from the age when the Japanese cars were kicking the rear of the American cars in sales. Oh wait, nothings changed. Well, Ford got the hint and started to make more fuel efficient compacts. GM didn't and stuck with SUV's and then the recession hit and to add insult to injury, the gas hikes of 08 hit. Those are the ones that Obama said didn't go high enough and would have had a gradual increase instead. GM sales tanked and we now have Government Motors instead. I wonder how many clunkers that are in decent shape that get better mileage than the ones being sold out there. Worse, how many are not that old or bad of shape that are going to be destroyed for a BBD (bigger, better, deal?

What I found to be really disturbing is the fact that the cars are going to be destroyed. Some parts can be recycled, but the engine and trans motion systems are to be destroyed. The parts that are most in need. My Metro has one huge disadvantage (other than the AC compressor burned out which makes summer driving a good water weight loss program) is that it's near impossible to find parts for it. After 10 years they don't make them (which many of the so called clunkers are around 10 years old) and there aren't many Metros in junk yards (seems they last and people don't give them up easily). Destroying these clunkers and removing any resale of the parts only can mean one thing: inflation. When you take cars out of the market, the very ones that the poor need because they're the only affordable ones they can purchase, you create scarcity. Like my Metro's parts which cost quite a pretty penny because of the difficulty of finding parts, we're taking actual CARS out of the market. This will increase the prices of used vehicles and make things even more difficult than the poor that BO claimed this was intented to help. People don't know some advice when I went through divorce counseling: the most affordable car is the one you have. I wonder if any of the poor actually got a new car under this program. I seriously doubt they could afford it.

In the end, this was nothing but an attempt to give his Union buddies a boost while claiming to aid the poor. It wasn't so much of a success as it was a victim of its own bad planning. I remember what happened the day the Clinton's moved into the White House when they offered free tours (provided they got tickets). They got overwhelmed by the numbers. You see, when you give something for nothing, you get a lot more people than you expect to take advantage and this happened here. This program didn't even last a month, despite tripling the funding. Mainly the middle class and rich profited from it. I'm sure this will be used as a model for more socialization of our economy. We'll see when the stupid Volt comes out. With a $40,000 price tag, 40 mile range, and no cash for clunkers, the car being green and the only American car at that, we'll see if this becomes the excuse to make all cars green and all non-green cars illegal. I've learned to put nothing past this government.

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