And Now The Rest Of The Story….(no…this really is the rest of the story about the "Cash For Clunkers" program)

I realize that I’m just a dumb old “car guy”….and not a brilliant, Harvard educated politician….but there are a couple of things that should be obvious to most anyone. (unless of course you’re a Harvard educated politician) For example….the “Cash For Clunkers” program. When I first heard about the program……there were no less that 1,607,356 reasons that ran through my head, as to why this program would not work. (Technically…as these reasons ran through my head the actual words were “why this program would suck”. But since that doesn’t sound professional, I won’t use that term) Let me start out by saying that I have been in the “car business” for 28 years. Of those 28 years…..I spent a couple of years as a salesman…..and the rest as a manager or owner. So my perspective may be somewhat different than others who will write about this….

First of all….the whole premise of this program was that the government would be spending billions of dollars of my money (tax money…and since I pay taxes…it’s my money) to get people to spend their money. Here’s the problem…….(well the first of many). The majority of the people didn’t use their own money to buy those cars….they had to borrow money in order to buy them. That means that you stimulated people into BORROWING money at a time when we have record levels of personal debt…..record levels of bankruptcy…..close to record levels of unemployment……and record levels of home foreclosures. So was “stimulating” the public to go out and take on more debt….the smartest thing do? NO….of course not. In fact I will predict that within 1 year…we will also see record levels of car repossessions. Who will pay to clean that up? And of course...the blame will fall on those "evil car dealers" who forced these people into cars that they could not afford.

The numbers that came back after the program closed said that there were 690,000 new vehicles sold under the “cash for clunkers” program. (and all of the politicians stood and patted themselves on the back for a job well done) At up to $4500 per car....that the government “gave away for free”….the total cost of this program came out to over 3 BILLION dollars (yes with a “B”). Now that’s sounds bad enough…but there are several other problems. We now hear that of the 690,000….only 125,000 of those cars were directly attributed to the program. Right about now a lot of you guys are probably asking….”So what can the rest of those cars that were sold be attributed to?”…... Well some of those remaining 565,000 cars were bought by people who were going to buy a car during that same period of time anyway…..but they said “hey if I can get $4500 for free….I’ll do it now”. So that was just wasted money. Then the rest of those 565,000 cars were bought by people who were going to buy a car over the following few months who said…”hey if I can get $4500 for free….I’ll do it now”. (sound familiar?) More wasted money. We know that this was the case….because as soon as the “cash for clunkers” program was over…..new car sales fell FLAT. All they did was steal future business…that would have been there anyway….….I will bet that the 12 month running average….will probably end up the same as it would have been WITHOUT spending 3 billion dollars.

Now that part of this story is probably being written about by 1000’s of other people. But here’s the part that you probably won’t hear about…(hence the whole "rest of the story" thing)…… Since sales of new cars have been down for at least the last couple of years….that also means that there have been fewer cars traded in. I remind you that the only source of those "used cars"...is when somebody trades their car on another car...and the majority of those come from "new car dealerships"....(Just as a side note....The reason that the only source for used cars is when they are traded in......is because there are no longer any factories that are dedicated to building "used cars").........That in turn has caused the price of used cars to skyrocket over the last couple of years. With that shortage of used cars already existing prior to the “cash for clunkers” program….NOW let’s fast forward to this brilliant scheme. (First....go back and read the side note about the used car factories....you DID get it...right?)

Each of those 650,000 transactions in the “cash for clunkers” program…..involved a “trade-in”….in order to qualify for the program. But in the infinite wisdom of the government….the program required that the dealers who took those cars in on trade….would have to “destroy” the trade-ins. This was done by pouring something into the engine that would cause it to seize up. These cars could NOT to be resold under any circumstances. They had to be reduced to salvage. The reasoning (flawed reasoning) was that if we take these “gas hog” cars off of the road and get people to buy “eco-friendly” cars….we will help the environment and SAVE all of these billions of dollars back. (that is some seriously twisted logic) Well….it didn’t really happen that way. For one….people who have a brand new car…..tend to do more driving than they did, when they had their old crappy car….so that didn’t really help the environment very much. (more driving=more exhaust emissions…AND…more driving=using more gas) The OTHER less obvious thing was this…..A used car market that was already in trouble because of a lack of cars….was hit even harder because of this program……Why is that you ask?.....It’s because the price of used cars that was already at an all time record….set new records…..because we just sucked 650,000 “trade-ins” out of the system. (that supply and demand thing again) So….for all of the people who could not....would not...or cannot afford to buy a new car….they now have to pay even more to get a used car than they would have....without the “cash for clunkers” program…….Good move there Washington….money well spent. You screwed over the taxpayers for 3 billion dollars……you “stimulated” a lot of people to go into debt, who shouldn’t have gone into debt……AND you hurt an entire industry (the used car market) in one swoop. To me that could possibly be the greatest example of government efficiency ever seen….Then Again….That’s Just Me.