Cash for Clunkers Worse Than We Thought
October 9, 2009
It’s worse than anyone thought. Ignore all the gas crap and just look at how the stupid car buyer got taken to the cleaners:
If you traded in a clunker worth $3500, you get $4500 off for an apparent “savings” of $1000.
However, you have to pay taxes on the $4500 come April 15th (something that no auto dealer will tell you). If you are in the 30% tax bracket, you will pay $1350 on that $4500.
So, rather than save $1000, you actually pay an extra $350 to the feds. In addition, you traded in a car that was most likely paid for. Now you have 4 or 5 years of payments on a car that you did not need, that was costing you less to run than the payments that you will now be making.
But wait, it gets even better: you also got ripped off by the dealer.
For example, every dealer here in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500 the month before the “cash for clunkers” program started.
When “cash for clunkers” came along, they stopped discounting them and instead sold them at the list price of $15,500. So, you paid $3000 more than you would have the month before. (Honda, Toyota, and Kia played the same list price game that Ford and Chevy did).
So let’s do the final tally here:
You traded in a car worth: $3500
You got a discount of: $4500
———
Net so far +$1000
But you have to pay: $1350 in taxes on the $4500
——–
Net so far: -$350
And you paid: $3000 more than the car was selling for the month before
———-
Net -$3350
We could also add in the additional taxes (sales tax, state tax, etc.) on the extra $3000 that you paid for the car, along with the 5 years of interest on the car loan but let’s just stop here.
So who actually made out on the deal? The feds collected taxes on the car along with taxes on the $4500 they “gave” you. The car dealers made an extra $3000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. The manufacturers got to dump lots of cars they could not give away the month before. And the poor stupid consumer got saddled with even more debt that they cannot afford.
Obama and his band of merry men convinced Joe consumer that he was getting $4500 in “free” money from the “government” when in fact Joe was giving away his $3500 car and paying an additional $3350 for the privilege.
Reported on the Marin Conservative Forum
NY dealers pull out of clunkers program
August 19, 2009
The program itself seems to be a clunker; popular with the citizens but unpopular with the car dealers who have to wait for their government payments! Heaven help us if they take over health care. I see the screen play now:
Nurse: Doctor, what are you waiting for? Shouldn’t you be transplanting that new heart into your patient?
Doctor: I am waiting for my reimbursement from Uncle Sam.
- FedUpEditor
From the Associated Press, August 19, 2009 at 2PM, NEW YORK: Hundreds of auto dealers in the New York area have withdrawn from the government’s Cash for Clunkers program, citing delays in getting reimbursed by the government, a dealership group said Wednesday.
The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members have left the program because they cannot afford to offer more rebates. They’re also worried about getting repaid.
“(The government) needs to move the system forward and they need to start paying these dealers,” said Mark Schienberg, the group’s president. “This is a cash-dependent business.”
The program offers up to $4,500 to shoppers who trade in vehicles getting 18 mpg or less for a more fuel-efficient car or truck. Dealers pay the rebates out of pocket, then must wait to be reimbursed by the government. But administrative snags and heavy paperwork have created a backlog of unpaid claims.
Schienberg said the group’s dealers have been repaid for only about 2 percent of the clunkers deals they’ve made so far.
Many dealers have said they are worried they won’t get repaid at all, while others have waited so long to get reimbursed they don’t have the cash to fund any more rebates, Schienberg said.
“The program is a great program in the sense that it’s creating a lot of floor traffic that a lot of dealers haven’t seen in a long time,” he said.
“But it’s in the hands of this enormous bureaucracy and regulatory agency,” he added. “If they don’t get out of their own way, this program is going to be a huge failure.”
The program is administered by the Department of Transportation. Transportation Secretary Ray LaHood said Wednesday that dealers will be repaid for the clunkers deals they have completed.
“I know dealers are frustrated. They’re going to get their money,” LaHood told reporters. He said the Obama administration would soon announce how much longer the $3 billion car incentive program will last.
Through early Wednesday, auto dealers have made clunkers deals worth $1.81 billion, resulting in 435,102 new car sales, according to the DOT.
