News Who Benefits from the CARS Program?

[j93]

I was wondering what people thought about the CARS program.

http://www.cars.gov/

It is a program with niche audience and clearly ill advised. Who is it for?

The only thing I imagine it could do is drive the price up of used junkers cars due to people hoping to buy one cheaply but less than a 2500 and waiting a year hoping to use it as a coupon.

 

[OmCheeto]

I was wondering what people thought about the CARS program.

http://www.cars.gov/

It is a program with niche audience and clearly ill advised. Who is it for?

The only thing I imagine it could do is drive the price up of used junkers cars due to people hoping to buy one cheaply but less than a 2500 and waiting a year hoping to use it as a coupon.

Well. I was a bit pissed that I traded in a clunker, trying to stimulate this freakin' economy, for a 2009 California compliant emission vehicle 2 months ago only to find out today that the $1E9 had been spent in 1 week.

And now I hear (yes. hearsay) that another $2E9 has been approved for the program.

Actually, I'm not pissed.

I like my new truck. :!)

Oops. http://www.newser.com/article/d99pl1o80/house-passes-2-billion-to-replenish-cash-for-clunkers-car-purchase-program.html"

 

[Ivan Seeking]

It has given the auto industry a huge booster shot. The auto dealers are thrilled. One dealer in NY said that half of all sales this week were driven by the cash for clunkers stimulus.

The money was expected to last twelve weeks and it was gone in four days! Congress had to rush through legislation to extend the program due to its raging success. So there's an additional 1 billion in the economy that we didn't have four days ago [as soon as the auto dealers file for their reimburstments].

Another great success brought to you by the Obama admin.

The long-term benefit is to not only stimulate the economy, but also to help reduce our dependence on foreign oil, which directly affects the GDP by reducing the trade deficit. The ~ 250,000 gas hogs traded in will be destroyed.

 

[Pengwuino]

Another great success brought to you by the Obama admin.

Doesn't the word "another" imply there's been more then one?

(stay on topic people! )

The only thing I imagine it could do is drive the price up of used junkers cars due to people hoping to buy one cheaply but less than a 2500 and waiting a year hoping to use it as a coupon.

This is quite a coincidence! I was reading the wikipedia entry not 5 minutes ago and noticed something quite interesting.

http://en.wikipedia.org/wiki/Cash_for_clunkers

To ensure that running trade-in vehicles will not be resold by dealers, the program outlines a procedure for destructively disabling the engine (and thus also precluding the possibility that any mechanical engine components might be salvaged to be used in the repair of any other vehicles): the oil is drained and replaced with a sodium silicate solution, and the engine is then started and run until the dehydrating solution causes engine internals to abrade and ultimately seize. In addition, the salvage or scrap facility which acquires the vehicle cannot sell any powertrain components from the scrap vehicle. This includes the disabled engine (most specifically the long block components), the transmission/transaxle, and in some cases the axle assemblies. The salvage or scrap facilty can sell any other component from the scrap vehicle until they are ready to crush and/or shred the vehicle. The salvage or scrap facility has 180 days to ultimately crush and/or shred the vehicle.

So it looks like there won't be an influx of junkers to purchase.

 

[Ivan Seeking]

Doesn't the word "another" imply there's been more then one?

Obviously you haven't been watching the news. The credit markets have mostly stabilized; home prices are up for the first time in 34 months; the DJIA is up 40% since the low in march [that would yield an annual gain of about 120%]; the GDP was five times better than last quarter and growth is expected next quarter. And most importantly, the world economy did not collapse. This was all accomplished without nationalizing the banks, in spite of intense pressure on some fronts to do so.

The cars program is just the latest good news.

 

[TheStatutoryApe]

From what I was hearing on the radio it sounds like they should kill the program before it costs too much more. The $2B they just added is probably already mostly gone with all of the back applications piled up.

 

[Office_Shredder]

From what I was hearing on the radio it sounds like they should kill the program before it costs too much more. The $2B they just added is probably already mostly gone with all of the back applications piled up.

Honestly, a couple billion dollars to push another million car sales isn't a big deal. Far more cost efficient than trying to bail out Ford if it goes under also

 

[TheStatutoryApe]

Honestly, a couple billion dollars to push another million car sales isn't a big deal. Far more cost efficient than trying to bail out Ford if it goes under also

I'm not adverse to the idea and what they are accomplishing. I am just wondering how much more money it is going to cost. Apparently dealers have been racking up applications since July 1st. In less than a week the number of applications they had processed already broke the bank and there are still plenty more waiting to be processed right now. If they keep accepting applications I'm wondering how many dealerships are going to be left holding the bag.

 

[Office_Shredder]

I'm not adverse to the idea and what they are accomplishing. I am just wondering how much more money it is going to cost. Apparently dealers have been racking up applications since July 1st. In less than a week the number of applications they had processed already broke the bank and there are still plenty more waiting to be processed right now. If they keep accepting applications I'm wondering how many dealerships are going to be left holding the bag.

Wouldn't that be an argument for putting more money into it? To get through that backlog of applications

 

[TheStatutoryApe]

Wouldn't that be an argument for putting more money into it? To get through that backlog of applications

Certainly. But they haven't stopped accepting them! Sorry. That's what I meant by 'kill it', stop accepting applications. It just seems like it could spiral out of control and turn into a big money hole if they don't stop accepting the applications. Now that it has been in the news so much there will probably be more people looking to take advantage.

 

[j93]

http://en.wikipedia.org/wiki/Cash_for_clunkers
So it looks like there won't be an influx of junkers to purchase.

I meant private-party sale by someone who hasnt traded their car in , any piece of s--- car that barely runs buy it for 800 then keep it for a year and then turn it into the dealer for a 3500-4500 credit effectively using it as a coupon.

 

[j93]

Honestly, a couple billion dollars to push another million car sales isn't a big deal. Far more cost efficient than trying to bail out Ford if it goes under also

It has no provisions about buying american cars.

 

[russ_watters]

So there's an additional 1 billion in the economy that we didn't have four days ago [as soon as the auto dealers file for their reimburstments].

Another great success brought to you by the Obama admin.

And another billion dollars we don't have, to be subtracted from our GDP (plus interest) over the next few years!

Don't get me wrong, it's not a terrible idea, but just because the money went fast, that doesn't have anything to do with whether the idea was a "great success".

This was all accomplished without nationalizing the banks, in spite of intense pressure on some fronts to do so.

I'm glad he didn't do that either, but you can't give someone credit for doing something good by not doing something bad. I didn't kill anyone today, so that makes me a great person!

 

[mgb_phys]

The system in Canada is slightly smarter. You can trade in your car for $X in public transit passes or 75% of X toward a bicycle or 50% of X in cash.

Th system in the UK is impressively stupider, last year they announced possible large rebates for clunkers. Which might start this year or next year, they are looking into the details. The result is zero car sales because nobody wants to buy a car now when they might get a few $1000 off in 6months.

 

[Ivan Seeking]

And another billion dollars we don't have, to be subtracted from our GDP (plus interest) over the next few years!

Don't get me wrong, it's not a terrible idea, but just because the money went fast, that doesn't have anything to do with whether the idea was a "great success".

And if no one took advantage of the program? The goal was to stimulate auto sales and put money into the system. It couldn't have been more successful.

As for the increased debt: Hopefully you know by now the working theory that by spending the stimulus money now, we will help to stimulate growth and ultimately reduce the debt to GDP ratio by growing the GDP. There are no guarantess that this will be successful, but I put much more faith in Obama, Geitner, and Bernanke, than I do the Republicans who are complaining - the ones who got us into this mess.

Were the GDP to remain flat, as happened with Japan for over a decade, our long=term debt would be far worse than by providing a stimulus now. The Japan model results from not acting aggressively. That is why we are acting aggressively. The Republican solution is to bury our heads, adhere blindly to a failed ideology, and ignore history.

I'm glad he didn't do that either, but you can't give someone credit for doing mething good by not doing something bad. I didn't kill anyone today, so that makes me a great person!

Many economists wanted him to nationalize the banks - many said he had no choice if he was to prevent a national and perhaps a global economic meltdown. Obama was convinced that he didn't need to do this, and he was right. It wouldn't be "bad" to nationalize the banks if it was the only way to save the country from an even bigger disaster.

What's more, the right wing wants to portray him as a socialist when in fact he went out of his way to avoid socialist solutions. But, have any Republicans given him credit for this? Of course not. That would mean admitting they are lying...again!

 

[Skyhunter]

I meant private-party sale by someone who hasnt traded their car in , any piece of s--- car that barely runs buy it for 800 then keep it for a year and then turn it into the dealer for a 3500-4500 credit effectively using it as a coupon.

Never actually read the rules did you?

The trade-in must have been registered and insured by the owner for 12 months prior to the trade-in.

 

[j93]

Never actually read the rules did you?

The trade-in must have been registered and insured by the owner for 12 months prior to the trade-in.

Yes I did, but you didnt actually bother to read my post did you?

maybe if I simplify
12 months = 1 year

I meant private-party sale by someone who hasnt traded their car in , any piece of s--- car that barely runs buy it for 800 then keep it for a year and then turn it into the dealer for a 3500-4500 credit effectively using it as a coupon.

 

[j93]

Its an great idea in theory in practice a bad execution by the US.

 

[Ivan Seeking]

Also noteworthy: 250,000 cars lands in the neighborhood of $5-6 billion in auto sales.

These numbers ars impossible to quantify absolutely, but we can get a ballpark estimate of the effect the cars for clunkers has on oil consumption and the GDP. If we assume that we gained an advantage of 5 miles per gallon, say from 15 to 20 miles per gallon, by replacing gas hogs with more efficient gas hogs, and assuming an average of 15000 miles per year per vehicle, we can expect a reduced demand of about 62.5 million gallons of gasoline per year. We get about 19.5 gallons of gas from every barrel of crude, so if we assume the current price of about $70 per barrel, this respresents reduced imports of about $225 million dollars per year. If we also assume that we get a five-year benefit from this, we find a net benefit from the stimulus of about $125 million above the cost of the stimulus! So in fact by spending a billion, we get more than that back from the energy savings alone - even the superficial net effect on the GDP is less than zero. It is a money maker! The advantage gained through stimulating the economy is more difficult to quantify, but any advantage at all is icing on the cake. Presumably this will provide a significant boost to the auto industry and the economy.

Summary: The cars for clunkers program pays Americans instead of OPEC. OPEC is the only loser in this scheme.

It was reported earlier that Ford Focuses were flying out the showrooms this week.

 

[OmCheeto]

I think it's funny that the CARS.gov website lists the 2010 vehicles.

You can trade in your brand new $180,000 12 cylinder 12 mpg http://www.fueleconomy.gov/feg/CarsSelectEng.jsp?year=2010&make=Bentley&model=Continental%20Flying%20Spur&hiddenField=Findacar" for $4500, as long as it's in running condition of course.

And I was happy to see that the car I traded in did not qualify for the rebate.
It's hard to imagine that I could have picked up my brand new vehicle for only $5500 when the MSRP was almost $17,000.

But I like the program. I've long felt that the only thing keeping death trap micro cars from taking over the road were death inducing behemoths. It's odd to think that the program might eventually turn my truck from being one of the smallest on the road into one of the largest.

 

[TheStatutoryApe]

Yes I did, but you didnt actually bother to read my post did you?

maybe if I simplify
12 months = 1 year

Considering that the program was voted in on July 1st, went into effect a week ago, and was originally supposed to end in one month I really doubt this would be a problem.

 

[mgb_phys]

Considering that the program was voted in on July 1st, went into effect a week ago, and was originally supposed to end in one month I really doubt this would be a problem.

Unless you want to trade in a Delorean of course!

 

[j93]

Considering that the program was voted in on July 1st, went into effect a week ago, and was originally supposed to end in one month I really doubt this would be a problem.

Depends on the life of the Program since they are still honoring trade-ins till unknown

I don't drive an American car but I would like to trade in my old car for a newer, more fuel efficient one. Is this program only for American cars?

No. You may trade in or buy a domestic or a foreign vehicle.

 

[Ivan Seeking]

No. You may trade in or buy a domestic or a foreign vehicle.

So what? Toyotas and other foreign cars are actually made in the US. Conversely, many auto parts for domestic auto makers are made in places like Mexico.

This was not a bailout for auto companies. They already got that.

The argument about the GDP means nothing, right? You would rather give the money to OPEC than to Americans?

 

[mgb_phys]

I just read the details for this. The new car only has to do 22mpg!
So this program pushes up the minimum price of a used car to $3500 - out of the reach of most poor, trying to get something to get to a job, people so that the middle classes get a discount on their next 22mpg SUV
I thought the new guy was supposed to be a socialist?

 

[j93]

I just read the details for this. The new car only has to do 22mpg!
So this program pushes up the minimum price of a used car to $3500 - out of the reach of most poor, trying to get something to get to a job, people so that the middle classes get a discount on their next 22mpg SUV
I thought the new guy was supposed to be a socialist?

Thats what I don't get
a)it doesn't push up the combined fuel MPG to anything in the high 20's.
b)It doesn't help poor people because it adds to the value of used cars
c) it doesn't help the poor because it doesn't apply to used cars that fit the New Car MPG requirements or exceed it. Those in the bottom of income distribution can't afford to buy new cars and for me who can afford to buy a new car I would not want to because the resale value drops the most in the first year I would rather buy a two year old model since it makes more sense economically.

c) I justified away thinking it must be another bailout for auto makers but then I realized it doesn't apply only to american cars and foreign automakers should get bailed out by foreign countries. Even those who support it don't believe its a bailout.

This was not a bailout for auto companies. They already got that.

 

[mgb_phys]

c) I justified away thinking it must be another bailout for auto makers but then I realized it doesn't apply only to american cars and foreign automakers should get bailed out by foreign countries. Even those who support it don't believe its a bailout.

It's a bailout for dealers.
There are about 2million car dealers and only 400,000 UAW workers.

Foreign/domestic doesn't really matter these days, as somebody already posted most 'Japanese' cars in America are built in America or Canada while a lot of the parts for 'American" cars are imported.

 

[j93]

Foreign/domestic doesn't really matter these days, as somebody already posted most 'Japanese' cars in America are built in America or Canada while a lot of the parts for 'American" cars are imported.

Yes I knew that but I don't understand why bailout the "US" automakers then if since if they go under the market share they occupy will go to foreign automakers which will build those cars in the US which will create replacement jobs unless foreign makers don't create as many jobs as you imply in which case my original statement stands but it can't be "everything for everyone".

 

[KingOfChaos]

I was wondering what people thought about the CARS program.

http://www.cars.gov/

It is a program with niche audience and clearly ill advised. Who is it for?

The only thing I imagine it could do is drive the price up of used junkers cars due to people hoping to buy one cheaply but less than a 2500 and waiting a year hoping to use it as a coupon.

LOL..wow guys, don't use that site, seriously. By using that site, you give the government full access and rights to search your computer, since if you agree to their terms of service, you are physically giving them your computer.

 

[Office_Shredder]

I just read the details for this. The new car only has to do 22mpg!
So this program pushes up the minimum price of a used car to $3500 - out of the reach of most poor, trying to get something to get to a job, people so that the middle classes get a discount on their next 22mpg SUV
I thought the new guy was supposed to be a socialist?

The old car can only do up to 18 mpg when new. So a lot of older cars are still on the market

 

[mheslep]

... This was all accomplished without nationalizing the banks, in spite of intense pressure on some fronts to do so...

We agree on little else economically, but the bank stabilization turned out successfully without nationalization and the administration gets the credit. There was indeed pressure to nationalize from several corners and the administration held the course. One caveat: the seizure of Fannie Mae and Freddie Mac was effectively a nationalization of financial firms (the largest), and we have yet to see how that will turn out.

 

[j93]

LOL..wow guys, don't use that site, seriously. By using that site, you give the government full access and rights to search your computer, since if you agree to their terms of service, you are physically giving them your computer.

Cookies? Oh crap the government might know what I bought at Amazon.

 

[edward]

I meant private-party sale by someone who hasnt traded their car in , any piece of s--- car that barely runs buy it for 800 then keep it for a year and then turn it into the dealer for a 3500-4500 credit effectively using it as a coupon.

The program has always had an the end date. Now extended to Nov. 1 2009

Even the extra 2 Billion influx won't last that long.

It wasn't the government announcements of the program that brought on the throngs of customers. Dealerships have been advertising it intensively.



Some dealerships even started giving the rebates before the program officially began.

http://www.youtube.com/watch?v=lEQ-SPMAPCI&feature=related

I am not sure ow they got away with an early start but it would help explain the immediate surge of paperwork the government had to handle. The dealers couldn't file the forms until the program officially began.

 

[j93]

Depends on the life of the Program since they are still honoring trade-ins till unknown

 

[Ivan Seeking]

One caveat: the seizure of Fannie Mae and Freddie Mac was effectively a nationalization of financial firms (the largest), and we have yet to see how that will turn out.

Or course, Bush did that.

 

[Ivan Seeking]

I just read the details for this. The new car only has to do 22mpg!

However, it must also be better than the old car. If a contractor trades in a heavy-use truck that gets 15 mpg, and replaces it with one that gets 22 mpg, we are still coming out ahead.

 

[mheslep]

Or course, Bush did that.

Yep. And now Obama has the wheel. He can't afford to have them on the federal budget long term, but no action has been take regards their eventual disposition. Anecdotally, I talk socially to some of the folks that work over there on a regular basis, and I'm amazed at the absolute sense of entitlement in what are otherwise great folks - no matter what the burden on the country, they must survive, to be paid large bonuses, and to continue their 'mission'. Obama is running his individual mortgage bailout plan through Fannie/Freddie, so at the moment they're justified in feeling indispensable. My take is this whole credit crisis has likely worsened the mindset there, not humbled it, as if they were the only survivors of a fiery plane crash and now feel a bit invincible. Lehman Brothers might have ceased to exist, but never them. Wall Street'rs have nothing on them in the hubris department.

 

[drankin]

I don't think this program was intended to help the poor. It was meant to stimulate those who have money to spend it. And at the same time look like we are helping the environment.

 

[Ivan Seeking]

CNN just reported that 62% of the vehicles traded in are trucks. Many of those people bought fuel-efficient cars to replace their truck.

 

[mheslep]

... Many of those people bought fuel-efficient cars to replace their truck.

Where'd you get this part?

 

[Equate]

Interesting points:

...cash for clunkers might cause more driving, since new cars are more fun to drive, and more fuel-efficient cars are less costly to operate. Plus, it takes energy to scrap old vehicles and produce new ones, so the net effect of the program might even increase the use of fossil fuel.

Cash for clunkers is therefore just redistribution to certain consumers and to the auto industry; it is more bailout dressed up as environmental policy. Congress should end the program, not expand it.

Source: http://www.cnn.com/2009/POLITICS/08/03/miron.clunkers/index.html

 

[Office_Shredder]

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/08/03/financial/f082355D29.DTL

Officials said the program is succeeding in improving the efficiency of vehicles on the road. One official said the average fuel economy of new vehicles purchased through the program was 25.4 miles per gallon and the average fuel efficiency of the trade-ins was 15.8 mpg, representing a 9.6 mpg fuel economy increase.

 

[Adrock1795]

My only problem with this program is that, they destroy the engine and and make the sell of the transmission illegal. Those parts would be useful to repair other vehicles.

https://www.youtube.com/watch?v=X0IcIxhd8ks

 

[j93]

Where'd you get this part?

Thats what I was thinking

 

[KingOfChaos]

Did anyone actually read what I posted about this site?

 

[drankin]

Did anyone actually read what I posted about this site?

Yes.

 

[Al68]

So there's an additional 1 billion in the economy that we didn't have four days ago...

Is this a joke? Where is this money coming from, if not being taken out of the economy? Do you believe wealth was actually created by passing a spending bill?

 

[Al68]

One caveat: the seizure of Fannie Mae and Freddie Mac was effectively a nationalization of financial firms (the largest), and we have yet to see how that will turn out.

Fannie and Freddie were government entities to begin with. Their "seizure" was like "seizing" the USPS, not UPS or FedEx.

 

[mheslep]

Thats what I was thinking

I don't doubt that some or 'many' did, but I wanted to get more detail.

 

[mheslep]

Fannie and Freddie were government entities to begin with. Their "seizure" was like "seizing" the USPS, not UPS or FedEx.

This is one reason why they're dangerous, people get confused as to what the GSE's are and thus to don't accurately assess the risk the pose. No, they were nothing like the USPS. At the USPS the government signs the pay checks, the government sets the salaries, there are no shareholders and so on. Freddie and Fannie operated on a daily basis completely as private for profit entities complete with publicly traded stock shares. The government's role was to initially sponsor their creation. Not wanting to take responsibility for the huge mortgage flows as part of the yearly federal budget process, the government made them a private organization. There has always been an unwritten understanding, that Fannie/Fred vehemently denied in public, that they were creatures of the government and essentially had the backing of the treasury. (We now know via the seizure that this was always true). This allowed them to borrow money as if they actually were the US treasury, in other words to borrow money at the same interest rate as the treasury - essentially a license to print money.