How Cash for Clunkers Hurt Both the Poor and Small Business People

I am a big fan of used cars generally. I just can’t bring myself to buy a new one given the immediate depreciation which occurs once I wave goodbye to the salesman. It’s just too painful for me. I prefer to buy my cars used.

The secondary market is also important for those who can’t afford a new car. Given that 2013 autos average over $25,000, that’s true for a good number of American families. The total amount paid of course, depending on the interest rate, is in the end a whole lot more than $25K too. The used car market is a key (but often overlooked) part of the economy, and a vital resource for millions of people.

Cash for Clunkers decimated this market because it took many functioning (and paid for) older cars off the road, while at the same time it encouraged people to take on heaps of debt in the midst of the worst recession in 70 years.

Sadly this brilliant scheme didn’t work so well and many people who bought new cars could not actually afford them. To boot, the good used vehicles which remained in the market rose significantly in cost. Many Americans found themselves with a repo man in their driveway and suddenly priced out of a once affordable market.

I suppose if people wait it out enough repossessions will hit the street eventually that used car prices will again edge down. But it sure seems like a lot of pain to get nowhere, and way too much time on the bus.

(From TriCities.com)

First, the program destroyed approximately 750,000 working vehicles. They were crushed and sold for scrap metal, primarily to China. This created a severe shortage of affordable, reliable cars for folks like my customers who cannot afford newer, expensive cars. For independent dealers like me, the availability of used cars to resell diminished drastically, while prices skyrocketed.

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20 comments
KellyWalters
KellyWalters

I'm looking for a car for my sixteen year old and the used car prices are outrageous! In the five to eight thousand dollar range I can't find anything with less than 150,000 miles on it. I wondered if the clunker program had anything to do with it. It isn't until I reach the 8000.00 range that I can find anything with 90,000 miles, there are just no decent lower mileage cars out there anymore. That is ridiculous. Basically I'll be shelling out money for something that may last for a couple of years if we're lucky. It looks like we have no choice but to get into another car payment. You can bet it won't be from GM or Chrysler.

Aidan Haggerty
Aidan Haggerty

The used auto market was a mess when cash for clunkers was implemented...Governments don't usually have great business models.

Betty Stone
Betty Stone

Also made it harder to get used parts at junk yards to fix your own car...

Carol Rea
Carol Rea

yeah, it hurt..people went into debt for something they could not afford, parts were destroyed with the clunkers turned in, and no one won excpet obama....it was a stupid idea and all of you stupid people fell for it...now, what do you think of clunkers..like the one we have in the whitehouse.....

Eric Tubbs
Eric Tubbs

Is the new car dealer I can tell you that it didn't help us either. Sure sales increased, in a month we sold almost every car on the lot. However, for the next 2 months we had nothing to sell. It killed our cash flow and made it very difficult to run a business. we did not even want to participate in the program but if we didn't we wouldn't have it any business for a month and a half. Typical unintended consequences of government programs.

MarloBreding
MarloBreding

The biggest mistake was if they were going to do this, instead of destroying the good usable vehicles they should have gotten poor people who drive oil leaking and gross polluting vehicle's off the road by trading their junky and dangerous vehicle's for one of these "KLUNKERS" that would have helped the poor and made the eviroment cleaner and safer.A WIN WIN

Steven Gauna
Steven Gauna

6.3 trillion was spent in 4 years under obama. Is sinking us into more debt by expanding government considered the road to prosperity?

Steven Gauna
Steven Gauna

$16,432,725,000,000 the debt is building the clock is ticking. US National Debt Clock.org

JC Catalano
JC Catalano

Ive done well under Obama...but then again, I dont hate him and blame him for forces outside of his direct control or mine. My business grows, my income grew, my stocks are doing well, we are out of the red finally. What is the problem? Oh, you didnt vote for him...I see.

Charles Edwards
Charles Edwards

the one real plus about Cash for Clunkers is that it took a hell of a lot of obama bumperstickers off of the road.

Sandra Kelley
Sandra Kelley

It was stupid idea that wouldn't and didn't work or make sense.

Larry Legassey
Larry Legassey

You people don't have a clue as to what you are talking about. Your whole story sounds like so much bull shit to me. I'm sure there were still many clunkers around that you could buy at reasonable prices, besides the fact that the cash foe clunkers was how long ago? Any clunker that you bought then would have long since died.

James Arriola
James Arriola

I work for a new car dealership. I watched as good used cars were destroyed to make some civil servant think he did something good. Many were better than what I drive, but thanks to an economy based on a tax them into poverty mind set, I could not afford better.

Stuart Bryant
Stuart Bryant

My personal experience shows this article to be 100% correct. We simply could not find decent used cars in our area and the few which weren't particularly decent were way overpriced. Wound up having to finance a used car for twice what we wanted to pay rather than pay cash as we customarily do. Thankfully interest rats are so low now! Those who try to be responsible & intelligent enough to avoid debt are finding this a difficult time. The poor will be buried by this. In the end, a really bad idea which served nobody well in the long run.

Jim Kelleher
Jim Kelleher

Mike Smith missed the point of cash for clunkers. Economists knew what the result would be. The plan was to drive low end competition out of business. It's what government does for their crony crapitalist friends. Redistribute wealth from outsiders to insiders. It worked as designed.

Mary Hackett
Mary Hackett

Obama is in favor of anything and everything to hurt small business

John Davis
John Davis

Self righteousness is a pitiful thing.. It makes people think they have the right to force others into their ways of thinking .. The only problem is that self thinking does not serve people, ONLY IT`SSELF...

Ellie Wyatt
Ellie Wyatt

those working at the auto dealerships knew and were talking... it was those spending money that was not theirs to spend that had no clue

Bob Laplace
Bob Laplace

It took them till no to figure this out. I kne it when it was going on.