Tuesday, July 28, 2009

Cash for Clunkers. Clunker of an Idea?

I'm sure if you've watched TV you've seen the "Cash for Clunkers" commercials for every Ford, Chevy, and Dodge dealership in your area. While the idea may seem pretty good, there's other factors that I don't see as a benefit to the program, or that it will even boost the sale of new cars.

For one example, my grandparents have a 1994 Dodge pick up. My grandparents recently purchased a new Ford Focus when they traded in their large Lincoln Town Car. Papa needed a smaller car due to the fact he's older and honestly shouldn't be driving in my opinion. I suggested a smaller car would be better. So now they have the Focus and the pick up. The Cash for Clunkers would work for my grandparents for their truck, but my grandparents already bought their small fuel efficient car. My grandpa is the only one that drives, so to buy another small car would be pointless.

Example two. My mom has a 1996 Crown Victoria that she has refused to get rid off. She has a brand new Lincoln Town Car that my dad bought for her birthday last year. My sister and I both have small sedan cars. My dad has a truck. If my parents were to trade in the 1996 Vic, why would we need another car? I told my dad that the 2010 Camaro was on the list for purchase, we considered the trade till my mom said no. So, my parents are keeping Old Vicky instead of bringing home a shiny new Camaro to go next to my Camaro. :( Grr.

Then there is example three. The person that drives a clunker bought the clunker at a cheap price. Clunkers or nicely termed, "Late Models" are cheaper. If a person who drives a late model bought a late model for a couple thousand dollars from a newspaper ad or Larry's Auto Mart, then how can they afford a brand NEW car?

People driving 2001 models and up aren't driving around in clunkers, they're decent body styles now. My sister's car is an 01 Grand Am that looks practically new (minus the few scraps I added when I hit a concrete cylinder in a parking lot). People that drive newer cars have a higher sell back rate than $4,500. If my parents wanted to buy a 2010 Camaro, they don't need an incentive to get rid of their old car to buy one, they have the means to do it.

A person who has enough money to buy a $20,000 car will buy a brand NEW car. I person in a lower income level who is strapped for cash wouldn't even begin to look at NEW cars. $4,500 for a car that is worth $2,000 is a nice offer. But that's only $4,500 off a car that is marked up in sticker price higher for $15,000-$20,000 when you originally could only pay $2,000.

It just doesn't work out.

Whether or not the "Cash for Clunkers" program works to "save" the American auto industry, I doubt the outcomes will be high.

Are you or anyone you know going to trade in your old car for a brand NEW car based on this "sweet, once in a lifetime" offer? Or are you sticking to your cheap, paid for, reliable A to B car?

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