Congressional clunker

The Cash for Clunkers program is now open for business. Theoretically, you can trade in that old pile of crap currently defacing your driveway for something shiny and new with up to $4,500 of government money. The idea is sound. It worked well in the European countries that did it in 2008. It could be a shot in the arm for car manufacturers, dealers, and all associated with the auto industry. It might even prod consumers towards more efficient vehicles that would lessen our oil dependence and help clean up the environment. Unfortunately, the plan was cobbled together by our esteemed representatives, proving that if you have a good idea that you’d like ruined it’s best to give it to Congress.

At $1B of funding, the program can help towards the purchase of roughly 220,000 vehicles (assuming that everyone gets the full credit). Even in a cataclysmic sales year like 2008, that’s a drop in the bucket. It won’t be adding a third shift or overtime at auto plants. It will help people who were thinking about buying a new vehicle in any case, and as such it probably counts as some relief for America’s middle class. But let’s be honest in a way that Congresspeople can’t really comprehend. People don’t drive beaters because they’re cool; they drive them because they can’t afford anything better. $4,500 is not going to change that situation. Consequently, the worst vehicles will still be on the road.

But wait, there’s more…

As the program stands, cars traded in under CARS will be destroyed (block shot and the rest of the parts sold). So the person who might have gotten a better vehicle than he was driving through the wonders of the used car market is out of luck. Lack of long-term, big-picture thinking must be a prerequisite to be a “lawmaker”.

The rules are, well, Congressional. The automobile to be traded in must be EPA rated at less than 18 mpg. In other words, the credit is mostly designed for those who purchased a giant SUV for no good reason and the few that have been keeping an old car running. If you plan on purchasing a “light duty truck” the new vehicle must be rated at 18 mpg or better; a 2 mpg improvement over your trade-in qualifies you for $3,500 and a 5 mpg improvement gets you $4,500. Should you choose a passenger car it must get at least 22 mpg; a 4 mpg improvement gives you $3,500 and a 10 mpg improvement qualifies you for the $4,500 credit.

This household consists of one 1987 Toyota Pickup (4×4) and one 2000 Pontaic Grand Am GT. The former would only be traded in after it was pried loose from my cold, dead hands. But it doesn’t matter because the Toyota doesn’t qualify. That’s right, a 23 year old vehicle with no modern emissions controls and a carburetor is not a Congressional clunker. I’d trade the Pontiac in for a Focus faster than you can say “Government Motors”, but it doesn’t qualify either. (Note: the ’09 Focus is EPA rated at 28 mpg, but i just spent 1300 miles in a rental that averaged better than 36 over the course of the trip…and that was with me making 300 miles in 3.5 hours for one leg of the trip. Yes, the EPA is full of governmental shit.)

So those of us who would gladly participate and improve the mileage of our vehicle dramatically are out of luck. Moreover, there have been reports of EPA ratings mysteriously rising above 18 mpg overnight for some vehicles. (The EPA says that they lowered some too.) Nor does the EPA take into account that a 15 year old vehicle does not, generally, perform as well as it did when it was new. Your real world results do not matter…probably because this is Congress we’re talking about, a group of people wholly divorced from real world results. And like the much-acclaimed new fleet mileage standards put forward by the Obama administration, the whole project is clearly designed to push consumers and manufacturers towards hybrids and the new class of kinder, gentler SUV’s that go by the name of “crossover”.

The ratings required of “light-duty trucks” are significantly lower, making it much easier to qualify for the full credit. What constitutes a light-duty truck/SUV is laughable. Chevy’s HHR is a “truck”. Toyota’s Venza and Rav4 are both trucks. The Ford Flex and Edge are trucks. And half of Subaru’s lineup (Forester, Outback and Tribeca) are considered trucks. Only in America would we define “truck” to include station wagons. You may remember how the SUV was a very profitable tool for auto makers to get around earlier versions of the CAFE standard. The crossover is the same trick with a new name, and it works wonderfully for the Cash for Clunkers program.

You’ll be hard pressed – unless you drive a king hell, PoS beater – to trade your passenger car in for another, non-hybrid, passenger car and receive the full credit. You could get that stupid Expedition out of your driveway and replace it with a passenger car, but many of us only feel safe in a vehicle that weighs 4,000 lbs or more. The solution is to trade the Expedition in for another, slightly less bloated rolling abomination and get $4,500 for doing so. Congratulations on gaming a system designed to be gamed.

So will you be participating in CARS? More importantly, when will we be able to trade Congress in for $4,500? That surely exceeds their combined resale value.

17 replies »

  1. And most of the US carmakers don’t make many cars that meet the targets, meaning that the clunker money will go more toward Japanese automakers than to US automakers. To be fair, however, many Japanese cars are actually made in the US these days, so it’ll still help – just not as much as was promised.

    As if anything a politician promises ever works out that well.

  2. It’s amazing what we expect the government to do. Educate us, feed us, provide us with jobs, manage our health, etc. Congress and bureaucracies aren’t getting the jobs done. Get them out of the way!

    • RH: I can’t recall when I’ve seen so many questionable ideological assumptions embedded so neatly in so few words. Take that first one – can you give me some examples of corporations doing a bang-up job educating us? I ask as a guy who works in a corporation and has in the past actually been corporate education boy himself. I’ve also been a college professor. So I have some first-hand insight into the realities of the situation, and would love to hear what it is that I’ve missed over the last 25 years.

  3. “As the program stands, cars traded in under CARS will be destroyed (block shot and the rest of the parts sold). So the person who might have gotten a better vehicle than he was driving through the wonders of the used car market is out of luck. Lack of long-term, big-picture thinking must be a prerequisite to be a “lawmaker”.”

    I would think not getting them out on the road again would be part of the point of getting them off the road in the first place.

    But, yeah, this program is just spitting in the wind.

  4. Dr. Slammy,

    Thanks for your compliment about “embedded so neatly in so few words.” We homeschool so I guess I wasn’t thinking of corporations educating. I wasn’t thinking about corporations at all, but rather individual responsibility and liberty. And I’m not sure it’s “questionable ideological assumptions” that I have as much as “different ideological assumptions.”

  5. Farley: Yes, that is part of the point. But when we consider that those driving the worst clunkers are not going to participate in the program we can also figure that some of those people would actually be stepping up by getting a fantastic deal on the “clunkers” turned in…then the cars turned in for the “clunkers” should be destroyed.

    Brian: I’m not sure that’s true. There are quite a few US models that do meet the requirements (and the Japanese trend towards building larger cars and SUV’s means that many of those cars will not meet the requirements either). The trouble for car buyers will be finding any passenger car that meets the improvement requirement…unless the buyer goes hybrid.

  6. Timely article. My wife, Mrs. Felch, and I need to purchase a new car for her, as her 1998 Buick LeSabre is on it’s last legs. My milage calculations over the years have rated this car at 13 MPG city, and maybe 18 MPG highway. I went to the lovely CARS website, and guess what? Somehow, the ’98 LeSabre is rated at a COMBINED milage of 21 MPG, making us ineligible. That car NEVER got 21 MPG HIGWAY even on it’s best day. I was thinking my usual thoughts that we had been cheated, that the milage rating was false and fully fabricated, but I convinced myself that it was just the angst talking. Now, I’m not so sure.

  7. Yeah, I’m looking through the lens of living in a state that has yearly inspections. I hardly see anything that is considered an outright clunkity, clunk, ‘clunker’.

    Alabama, on the other hand…..

  8. Howie: Yes, what qualifies and what doesn’t appears to be almost random (the last minute changes that the EPA slipped in make things even more strange). Your LeSabre should certainly qualify. I’m not sure what it is, but something stinks about the program. And i’ve seen pictures of cars traded in to dealerships…many of them are not “clunkers”.

    Farley: Living in a state with tail pipe tests changes everything. Michigan used to have them but we don’t anymore. There would be a lot of cars off the road (or at least getting new catalytic converters) if every state had inspections.

  9. Lex,

    I am on my second Focus wagon. Best little car I’ve ever owned and sadly, Ford has decided to discontinue this little gem.


  10. Evidently the program was too wildly popular, they’ve suspended it. You were so right about how this program was so low-balled.

  11. Jeff: it is a shame…wagons are cool. As nice as the ’09 is and as good as the ’10 sounds, i’m disappointed that there will not be a wagon or a true hatchback.

    Farley: This will be a mess. Nobody knows how many cars have been traded in. The administration says that everything already done will be honored, but with the trouble dealers are having handling the paperwork i would not expect them to take any more cars until the mess is sorted out. And remember that the dealer has to destroy the engine before filing the reimbursement application.

  12. Still seems like pissing into the ocean. And from what little I’ve heard, they’re saying they are going to honor the deals already made…which, by the sound of things, would probably take up much of the additional $$$$. Not that anyone really knows.

  13. Well metaphored, Mike. As i understand it, dealers have pretty much stopped making the deals until they find out what’s going on. My guess would agree with yours that the additional $2B will be gone pretty damned quick. (that first billion only averaged 13 cars/dealership)

    The other question is how many people overextended themselves for a car loan to take advantage of the program?