News Who Benefits from the CARS Program?

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The discussion centers around the CARS program, also known as "Cash for Clunkers," which aims to stimulate the economy by incentivizing consumers to trade in older, less fuel-efficient vehicles for newer, more efficient models. Participants express mixed feelings about the program's effectiveness and its implications. Some argue it primarily benefits the auto industry and raises the prices of used cars, making them less accessible to lower-income individuals. Others highlight its success in boosting auto sales, with reports of dealers experiencing significant increases in transactions. The program is said to have led to a notable improvement in the average fuel economy of traded vehicles, but concerns about its long-term financial sustainability and potential for increased consumer debt are raised. The discussion also touches on the environmental impact, with some suggesting that the program may inadvertently encourage more driving due to the appeal of new vehicles. Overall, while the program has been credited with stimulating economic activity, its broader implications for consumers and the environment remain contentious.
  • #61
j93 said:
They buy whatever they can get for cheap just to get around wether it be an 80's miata or that ugly SUV rodeo car. Some people have to buy gas guzzlers for their job ie a truck. The gas isn't much of an issue unless thinking in the long run which most people do not when the only thought is how they are going to get to work quickly.

In that event, we need to consider not a five-year advantage for the GDP, as I did. Instead we need to consider something more like a fifteen-year advantage, which would mean that we get more something more like a 4:1 or 6:1 return on our billion dollar investment, in terms of the GDP.

Thanks, you make a good point: We have to consider not only the immediate benefit of getting a clunker off the road, we also have to consider that the incentive to buy fuel-efficient cars will put some of those cars on the road for many years in place of others that would have been gas hogs. That is to say that some people will buy more efficient vehicles that otherwise wouldn't have done so.

This is not true. Think about the amount of cars in Los Angeles.

What does that have to do with anything? Usage is dependent on need. That doesn't change no matter what vehicle one owns.
 
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  • #62
jimmysnyder said:
Google "broken window fallacy". Are they going to give incentives for people to destroy their houses next?

The broken window fallacy does not apply in this context. The reason is that we are effectively creating wealth [not depleting wealth] by reducing the trade deficit.

If the shopkeeper buys a high efficiency window to replace the old leaky one, and as a result, over the coming years, the shopkeeper reduces his heating bill by more than the value of the window, and assuming that his heat energy supplier is a traveler from a distant land, everyone wins but the traveler - OPEC.

The real number to consider is the GDP. That is the bottom line.
 
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  • #63
This all seems very hand-wavey to me. Does anybody have a link with some sort of ballpark estimates?

The main complaints I seem to be hearing are:
1) Depreciation of the new car
2) The cost to dispose of the old car
3) Cost to manufacture the new one
4) The cost of borrowing the money for the incentive
5) The cost of borrowing the money to manufacture the car
 
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  • #64
Ivan Seeking said:
When I said respectable, I meant that wrt to social consciousness and being part of the solution to the energy problem, the trade deficit, and our reliance on foreign oil, instead of being part of the problem.
Yes, understood.

That is not evidence that it applies in the case of cars.
The theory, well documented over all kinds of data, applies to the replacement of _any_ energy using device with a more efficient one. There are complications and other counter acting economic effects.

I say it is silly based on a practical perspective. People don't normally drive just to be driving. The drive when they have a need to do so.
People drive, fly, take the train, eat a hamburger all when they need/want to and always with an eye on the cost of each. The effects of cost are not always immediate because of elasticity (slack in the market), but eventually always come into play. In the case of the car, a practical example would be that third yearly trip to grandma's house that was previously forgone because of the gas cost in the clunker, but now in the new 25 mpg ride is affordable again.

Though I still oppose it, all and all this is one of the more effective stimulus ideas, because it is timely and targeted, dramatically unlike the rest of the stimulus. But it is not without costs, and I don't mean just to the the US Treasury. It benefits the few, at a cost to others, particularly those with very low incomes as they can't play.

Only temporarily. In the long term, all of the more fuel efficient cars will help to drive down the used car price for fuel efficient cars, which are typically more expensive than gas hogs, which means that fuel efficient cars will be more available to the disadvantaged. This in turn means that they will pay less of their incomes out to OPEC.
Getting off (imported) oil is a great goal though I don't care for these means. In the long term the gas hogs clunkers disappear by themselves. And if the argument is the application of market forces to the car companies will help the disadvantaged by increasing the supply of fuel eff. cars (and lowering the cost), I can think of a counter argument along those lines. The disadvantaged need very, very low cost cars. Detroit traditionally avoids this market, they chase the higher cost and higher margin cars (esp. SUVs) so they and the unions can maintain the vertically integrated business models. That shamefully has left to India and China the role of making the $2500 car (e.g the Tata Nano). This buy back plan is yet another enabler along the old lines - the subsidy encourages Detroit to not serve the low cost market. Why do so when the govt is paying people to buy your more expensive cars?
Also, most disadvantaged people don't buy SUVs anyway. They can't afford the gas.
Eh? SUVs? They scrape to buy (as I did once upon a time) a $1500 car. Now all those cars cost ~$4000, or whatever the buy back price point.
 
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  • #65
mgb_phys said:
Depends what the aim is, to improve air quality in cities removing clunkers works quite well
I can think of much better ways to do that.

mgb_phys said:
you could introduce expensive frequent emmissions checks for cars more than n years old.

If you want to reduce overall fuel usage then you can put up gas prices, change emissions regs and tax/vehicle classifications to make smaller cars cheaper or always a favourite - build more roads.
And so, apparently, can you. Surely no one thinks this is a way to reduce pollution, you can't get a credit for dropping the clunker unless you buy a new slightly less clunker.
 
  • #66
jimmysnyder said:
I can think of much better ways to do that.
Yes, if we didn't have such faith in politicians we might be suspicious of the motives of handing out $4000 to people who could afford to buy new cars.

Surely no one thinks this is a way to reduce pollution, you can't get a credit for dropping the clunker unless you buy a new slightly less clunker.
Thats why the Canadian system might be better, you get more money for a trade in against transit passes, less against a bike or ride-share scheme and least in cash. There is no requirement to get a replacement car.
 
  • #67
Ivan Seeking said:
The broken window fallacy does not apply in this context.
This context is a textbook example of the broken window fallacy. You turn in a working car which is demolished and you have to buy a newly manufactured car to replace it.

Ivan Seeking said:
The reason is that we are effectively creating wealth [not depleting wealth] by reducing the trade deficit.
Reducing the trade deficit does not create wealth, it just shifts it around. There is only one way to reduce the trade deficit: Produce more and/or consume less. Politicians don't like this answer, they prefer to blame foreigners. So what, it's still true. This program will not save a drop of gasoline. The energy cost of building a new car to replace a servicable old car will eat all of the savings and more.
 
  • #68
jimmysnyder said:
...There is only one way to reduce the trade deficit: Produce more and/or consume less. Politicians don't like this answer, they prefer to blame foreigners. So what, it's still true.
That is so fundamentally true it should be inscribed on one those shiny white buildings the Pols enter daily.

This program will not save a drop of gasoline. The energy cost of building a new car to replace a serviceable old car will eat all of the savings and more.
Er probably true in terms of a not saving a drop of energy (coal et al) after counting the new car production. Likely it will save on some gasoline, though not much as much as hoped.
 
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  • #69
jimmysnyder said:
Reducing the trade deficit does not create wealth, it just shifts it around. There is only one way to reduce the trade deficit: Produce more and/or consume less. Politicians don't like this answer, they prefer to blame foreigners. So what, it's still true. This program will not save a drop of gasoline. The energy cost of building a new car to replace a servicable old car will eat all of the savings and more.

I've been waiting for someone to point this out.
 
  • #70
Ivan Seeking said:
jimmysnyder said:
Google "broken window fallacy". Are they going to give incentives for people to destroy their houses next?
If the shopkeeper buys a high efficiency window to replace the old leaky one, and as a result, over the coming years, the shopkeeper reduces his heating bill by more than the value of the window, and assuming that his heat energy supplier is a traveler from a distant land, everyone wins but the traveler - OPEC.
So if put sugar in someone's gas tank, ruining their car, and they go buy a new one, I can claim that putting sugar in gas tanks of older cars helps the economy.

Is that more analogous to the broken glass theory of economics, or the CARS program?
 
  • #71
Besides tax payers, of course, who footing the bill for this? Any takers?
 
  • #72
Al68 said:
So if put sugar in someone's gas tank, ruining their car, and they go buy a new one, I can claim that putting sugar in gas tanks of older cars helps the economy.

Is that more analogous to the broken glass theory of economics, or the CARS program?
Lol
mheslep said:
Er probably true in terms of a not saving a drop of energy (coal et al) after counting the new car production. Likely it will save on some gasoline, though not much as much as hoped.
Why the need to buy new arent there equivalently efficient 2007 and 2006 that are on the selling market or did some great technological MPG advance happen in 2008 that I am not aware of.




http://www.msnbc.msn.com/id/32290028/ns/us_news-environment/page/2/


http://blogs.cars.com/kickingtires/2009/08/cash-for-clunkers-selling-efficient-cars.html

"No. 2: Subaru saw sales of its all all-wheel-drive lineup skyrocket 34% in July thanks to Cash for Clunkers and the launch of the new Legacy sedan and Outback wagon, which haven’t even hit every state yet. While Subaru has been one of the only automakers to keep its head above water during the past year’s dismal sales slump, its lineup isn’t especially efficient, mainly because all its cars are equipped with all-wheel drive. The Impreza and Legacy with manual transmission get the program’s passenger-car bare minimum of 22 mpg combined, meaning anyone trading in a clunker for a Subaru car is likely to get only $3,500.The new Legacy and Outback have an optional CVT transmission which raises combined mileage to 26 and 24 mpg respectively."
 
  • #73
Some criticisms I have heard about on the radio.

WASHINGTON – "Cash for clunkers" could have the same effect on global warming pollution as shutting down the entire country — every automobile, every factory, every power plant — for an hour per year. That could rise to three hours if the program is extended by Congress and remains as popular as it is now.

Climate experts aren't impressed.

Compared to overall carbon dioxide emissions in the United States, the pollution savings from cash for clunkers do not noticeably move the fuel gauge. Environmental experts say the program — conceived primarily to stimulate the economy and jump-start the auto industry — is not an effective way to attack climate change.

"As a carbon dioxide policy, this is a terribly wasteful thing to do," said Henry Jacoby, a professor of management and co-director of the Joint Program on the Science and Policy of Global Change at MIT. "The amount of carbon you are saving per federal expenditure is very, very small."
http://news.yahoo.com/s/ap/20090805/ap_on_sc/us_cash_for_clunkers_pollution

The guidelines in the House-passed bill state that large SUVs and trucks, typically considered gas guzzlers in everyday conversation, qualify for the $3,500 credit, and in some cases the $4,500 credit, depending on the trade-ins that come through the door for them. New Category 2 trucks -- like the Hummer H-3, Ford Explorer, Chevy Silverado, and Toyota Tundra -- qualify if they get at least 15 MPG combined, and get at least one mile per gallon more than the car or truck being traded in.

The larger Category 3 trucks have no fuel-efficiency rules at all, since the EPA does not rate them for MPG. The only requirement for their purchase is that a buyer be trading in a pre-2002 Category 3 truck that is as large or larger than the one they're buying. For example, you can bring in your 2001 Chevy Suburban and buy a new Chevy Suburban, and still get the $3,500 credit. The bill has no requirement that the trucks, classified by the Federal Highway Administration as "work trucks," be used for farm or construction work.
cont...
 
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  • #74
TheStatutoryApe said:
The first link is the same as my msnbc one.
Some criticisms I have heard about on the radio.
The guidelines in the House-passed bill state that large SUVs and trucks, typically considered gas guzzlers in everyday conversation, qualify for the $3,500 credit, and in some cases the $4,500 credit, depending on the trade-ins that come through the door for them. New Category 2 trucks -- like the Hummer H-3, Ford Explorer, Chevy Silverado, and Toyota Tundra -- qualify if they get at least 15 MPG combined, and get at least one mile per gallon more than the car or truck being traded in.

The larger Category 3 trucks have no fuel-efficiency rules at all, since the EPA does not rate them for MPG. The only requirement for their purchase is that a buyer be trading in a pre-2002 Category 3 truck that is as large or larger than the one they're buying. For example, you can bring in your 2001 Chevy Suburban and buy a new Chevy Suburban, and still get the $3,500 credit. The bill has no requirement that the trucks, classified by the Federal Highway Administration as "work trucks," be used for farm or construction work.
cont...
I didnt know this. Oh come on.
 
  • #75
j93 said:
I didnt know this. Oh come on.

According to a CNN article they only assigned 7.5 million towards category three vehicles (no mention on category 2 though). It still seems to punch a hole in the pollution control and oil independence selling points of the bill.
 
  • #76
TheStatutoryApe said:
According to a CNN article they only assigned 7.5 million towards category three vehicles (no mention on category 2 though). It still seems to punch a hole in the pollution control and oil independence selling points of the bill.
Even the Category 2 vehicles. Come on.
but for the Category 3 even a few hundred of taxpayer money for that use is ?come on.
 
  • #77
j93 said:
...Why the need to buy new arent there equivalently efficient 2007 and 2006 that are on the selling market or did some great technological MPG advance happen in 2008 that I am not aware of.
Good point, though the rules of this program say buy new...
 
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  • #78
On the bright side, the dumpster business is booming. Those huge dumpsters that you normally see at construction sites have been sitting idle now that there aren't any construction sites. They have been repurposed as advertising gimmicks at every car dealer in this vicinity. They have a dumpster and an old car sticking out of it to entice people who were going to trade in their cars anyway to trade in their cars. I thought it was funny the first time I saw it and mildly annoying the second time. Now that I have seen a dozen examples of this joke I am so angry that I have decided to keep my Crosley CC just for spite.
 
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  • #79
And finally some good news for the RV business - pilots have somewhere to live convenient for the airport.
http://www.rvbusiness.com/tag/los-angeles-international-airport/
 
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  • #80
The auto company bailouts were unpopulare because they are anti-capitalist. This is just a clever way around that - it is an extra bailout for the auto makers, but this time, car owners pay 3/4 of the cost directly!
 
  • #81
russ_watters said:
The auto company bailouts were unpopulare because they are anti-capitalist. This is just a clever way around that - it is an extra bailout for the auto makers, but this time, car owners pay 3/4 of the cost directly!
Well, if you include all car owners, we're paying for 100% plus. The (reduced) cost of the new car, the cost of the bailout, plus the loss of the additional wealth that would have been created with the money if not taken from taxpayers.
 
  • #82
On the other hand this type of program is the pro-middle class politics that is always being promised by the Republicans were as historically Dems were all about focusing on the lower income folks and Republicans on the higher income folks leaving the middle class stranded.
 
  • #83
j93 said:
... as historically Dems were all about focusing on the lower income folks and Republicans on the higher income folks...
Yeah, according to the historically delusional logic and fraudulent claims of Dems.
 
  • #84
Al68 said:
Yeah, according to the historically delusional logic and fraudulent claims of Dems.
Regardless of what you may think of the welfare program it is a program aimed solely at the poor that was passed under Democratic leadership as well as the Section 8 program.
 
  • #85
j93 said:
Al68 said:
Yeah, according to the historically delusional logic and fraudulent claims of Dems.
Regardless of what you may think of the welfare program it is a program aimed solely at the poor that was passed under Democratic leadership as well as the Section 8 program.
The delusional logic and fraud refer to the claim that opposition to such programs is due to being on the side of the "higher income folks", against the poor.
 
  • #86
According to the website Autobytel.com - who have a search page for 'does my car qualify for a trade in' the most searched for vehicles are:

Ford F-Series
Ford Explorer
Chevrolet C/K/Silverado
Jeep Grand Cherokee
Dodge Ram
Chevrolet Blazer
Jeep Cherokee
Dodge Grand Caravan
Dodge Dakota
Ford Ranger

Of course - this doesn't mean people aren't replacing them with the equivalent new SUV/pickup, but it does suggest that people are getting rid of large vehicles rather than just trading in real 20 year old clunkers.

http://content.usatoday.com/communities/driveon/post/2009/07/68495642/1
 
  • #87
Obama said:
http://whitehouse.blogs.foxnews.com...nate-passage-of-cash-for-clunkers-extension/"
August 6, 2009
...the initial transactions are generating a more than 50% increase in fuel economy; they are generating $700 to $1000 in annual savings for consumers in reduced gas costs alone; and they are getting the oldest, dirtiest and most air polluting trucks and SUVs off the road for good.

http://www.msnbc.msn.com/id/32313464/ns/business-autos/"
Through late Tuesday, the most recent data available, more than $775 million of the original $1 billion had been spent, accounting for the sale of nearly 185,000 new vehicles. Administration officials estimate the new money will last into Labor Day and could prompt another 500,000 vehicle sales.

By my calculations, that's $1.5 billion dollars in fuel savings per year.
Perhaps they should have named it "The War on Gas Hogs".
For some reason, spending money on wars seems more palatable to some people.
 
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  • #88
Some auto dealers are running out of inventory.

Another 2 billion was approved.

I do believe that this is about the most popular and successful government program that I have ever seen initiated. And God forbid that we invest a few billion in the US [money that we get back by not paying OPEC anyway] - a few tenths of a percent of what we have spent in Iraq.

Why do so many people on the right think the Iraqi people are more important than Americans? Apparently this is the case. The only spending favored is spending for wars [and one we didn't even need to fight].

What is the value of ending our reliance on foreign oil? How much do we spend on the military to protect our oil interests? The benefits from this cars program is manyfold.

This is not just a bailout because it pays back in reduced oil imports and it helps to improve the US position globally. The less we need foreign oil, the greater our latitude of options.
 
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  • #89
And at least this time congress are showing the way, they are trading in their old clunker executive jets for shiny new ones.
No word on mpg or how much rebate they get but it might be of interest to mentors wishing to trade in their PF issue Learjets.

http://online.wsj.com/article/SB124960404730212955.html
 
  • #90
mgb_phys said:
And at least this time congress are showing the way, they are trading in their old clunker executive jets for shiny new ones.
No word on mpg or how much rebate they get but it might be of interest to mentors wishing to trade in their PF issue Learjets.

http://online.wsj.com/article/SB124960404730212955.html

That has nothing to do with the topic.
 

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