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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272 comments
James Janoch
James Janoch

Interesting, but such unscrupulous advertising should result in revocation of posting rights. Environmentalists have corrupted politicians accruing power and money just like any other special interest group. Why do you elect politicians?

James Janoch
James Janoch

Who decided what a clunker was? It was definitely mining the middle class to bail out auto manufacturing. I have no problem finding parts for my 12 yo Chevy:-)

Aleck L Gunther II
Aleck L Gunther II

Without a doubt it destroyed an entire industry. Now we buy it back. Way to dig a hole and jump in it.

Mario Gutierréz
Mario Gutierréz

@Rob Kennedy- show me the insurance statement proving what you say. If you do not know most cars after 7 years are usually considered "totaled" when it has just a minor fender bender due to high depreciation value of it. It is cheaper just to pay the owner for the blue book value of the car than the expense of paying to fix it. This is why most insurance companies just pay the owner the blue book value of the older car. This is why they are cheaper to cover an older car than a current or next year model. A surprise news flash: for all that safety that you advocate comes with a price tag. Next time see how "cheap" it is to fix or replace an ABS, airbag system. Like I said before, it must be nice where you live to get such "great" insurance rates thanks to fuzzy math.

Anita Jensen
Anita Jensen

I bet a bunch of people got their new cars repo'd

Anita Jensen
Anita Jensen

Kids need an older car to learn how to fix and care for cars. No one can work on a new car today unlike your an authorized mechanics

Jeffrey Rich
Jeffrey Rich

Cash for clunkers destroyed something of value and used our money to subsidize looters NEW car purchases! It started with a $1billion budget and ran out of money in the first couple of weeks so the pukes in DC reworked it to have ANOTHER $1billion which was not all spent and the pukes in DC had the AUDACITY to say that it came in UNDER BUDGET! How does THAT math work. COMMIE D-BAGS!!!

Rob Kennedy
Rob Kennedy

It is, and the reason why is because the rapid advancement of safety features on new cars, coupled with the full coverage warranty. Not that I expect you to understand, Mario. You didn't the first time I said it.

Eric Novak
Eric Novak

of course it did, they crushed older cars and hurt wrecking yards and forced people to go in deeper debt buying newer cars.

David C. Sanders
David C. Sanders

It was the only way to get all those Obama bumper stickers off the road.

Christopher Roskosh
Christopher Roskosh

Your subsequent cause and effect comment settled my stomach back down. Could tell then you were being sarcastic.

Tom Wigginton
Tom Wigginton

The EPA is an unconstitutional agency that is horrible for the country and should be disbanded. The states can regulate the environment as that is within their power according to the 10th amendment not the Feds

Tom Wigginton
Tom Wigginton

Destroying perfectly good vehicles or vehicles with salvage value is a destruction of wealth. This plan demonstrates Bastiat's broken window fallacy

Mario Gutierréz
Mario Gutierréz

@Rob Kennedy-I never said governments were forcing banks to loan out money to risky people. However from what i have read it was a combination of bank greed and government guarantees that help the loan fiasco. And speaking of "idiotic thought process" it must be the new math where full coverage insurance of a new vehicle is cheaper than full coverage on a older car\U0001f636.

Joe Sumner
Joe Sumner

so many good running cars met there demise v-8 engines go 300k alot only had 1X0k miles

Thomas Longshore
Thomas Longshore

The only upside is that the program got most of the "Obama for President" bumper stickers off the road.

RT Moore
RT Moore

the only good it did was get a lot of Obama bumper stickers off the road

Dan Buckles
Dan Buckles

and cut the use of oil and cleaned up the air...and zero percent financing gave people with low incomes easy way to buy and powered our economy. The financing was financed by trickle down economics of derivatives and will soon implode on itself. It's called unregulated capitalism or crony in your vernacular.

Syed Munir
Syed Munir

I too prefer used cars for the same, rational reason (new cars depreciate quickly, etc.). However, I have an intellectual issue with the general fabric of this essay. It presumes that Cash-for-Clunkers is more profitable for private used car sellers. Where is the evidence for it? The essay also smells of fascism. Sellers of used cars should be free to choose how to dispose of those cars (without breaking the law). Many logistical factors can make it impractical for a seller to wait for a buyer. Hence the proposal, or hint thereof, to sacrifice one's personal needs for the greater good is socialist & un-American. But we still have to prove that C4C is more profitable. That is the core this essay was built on. If the core has little factual support, then out goes the rest of the arguments.

Patrick Dirindin
Patrick Dirindin

Well "The Center for American Progress' was one of the largest proponents of the bill so you decide.

Myke McCormick
Myke McCormick

The programost was not intended to help that demographic it was intended to help auto makers and dealerships...it did

Dan Abernathy
Dan Abernathy

I never did like the whole Cash for Clunkers idea. One man's clunker is another man's affordable transportation to work. And so many of those older cars and trucks are easier and cheaper to repair then these new fangled vehicles with their dozen different sensors that constantly need replaced.

Todd Hartshorn
Todd Hartshorn

Stupid program just ruined good cars and put people in debt for new ones!

Pierce McDowell
Pierce McDowell

You can't turn on the television without seeing a car commercial but then you blame this program for people buying cars. Doesn't seem to be a sincere concern.

Pierce McDowell
Pierce McDowell

No mention of whether the program had any positive environmental and economic consequences? Talk about looking for a little cloud behind that silver lining.

Douglas Caughey
Douglas Caughey

Biggest dumb ass government program to the auto and salvage business! Probably put many people in debt that couldn't afford it, and killed the used car and salvage business. Now the then new cars are becoming junk and people still owe on them. Plus you can't work on the new crap unless you have some kind of degree!

Hank Krohn
Hank Krohn

Another Complete Waste of money by an Incompetent federal government.

Rob Kennedy
Rob Kennedy

Mark Oliver: feel free to answer that question as well.

Rob Kennedy
Rob Kennedy

Let me ask you a question, Mario Gutierréz, since you seem to be so hell-bent on defending such an idiotic thought process: IF the government was "forcing" banks to underwrite risky loans, then why didn't EVERY bank fail?

Dale McGee
Dale McGee

Not to mention all the "mom and pop" salvage yards that depend on these cars for inventory. That option was taken away after a month when dealers were forced to crush these cars and destroy the engines. This was a terrible idea!

Uwe Hoffmann
Uwe Hoffmann

Cash for clunkers2 - that's when we pay big bucks for Obama's hyper-vacations?

Max Bond
Max Bond

Another way the Federal Gov. F'ed us over. It is time to put them in their place.

Arthur Beiley
Arthur Beiley

Donald Trump paid off New York politicians to not allow gambling in NY. In order to protect his gambling properties in Atlantic City . He did this for almost 20 years . Is not Donald Trump an example of crony capitalism ?

DennisRymon
DennisRymon

   My definition of "Certified Pre-Owned" is somebody else done wore it out for me. Both my vehicles are pre-owned. One from a dealer, and one from an individual. To maintain them, I have to deal with parts that are unavailable, technical problems that are addressed through a TSB instead of a recall, and getting reliable, correct replacement parts to begin with. It's more economical to repair and maintain what I have, but it's a procurement hassle, and the cost to maintain exceeds the insured value of the vehicle.

  Unavailable Parts: No one has been able to explain why certain parts are unavailable. My theory is ITAR, International Trade in Arm Regulations. Many of the common automotive parts aren't made in the USA, and a lot of these parts are also used in weaponized vehicles. If a part is used on a weapons platform, it falls under ITAR. That's probably why I can't get the exact replacement mounting bolts for the wheel bearing assembly, not even from the dealer.

    TSB's: Technical Service Bulletins that only the dealers are supposed to know about. They usually cover vehicles under a certain mileage, but the problem doesn't manifest until after that mileage has been exceeded. For example, GM instrument clusters from 2003 to 2006. I've been told that it's the stepper motors for the gauges, but if I'm doing 70 according to my Garmin GPS, and the cluster speedometer is reading -0, why is my odometer rolling backwards? Oh since the fuel indicator and odometer are erratic, and I run out of gas because of that, have you tried putting gas in with the new EPA approved gas cans?

    Correct replacement parts: I get the right part in one in four attempts. It results in multiple trips back to the parts store or the dealer to try again.

    If Obamacare would just fix my back problems, I'd just use my horse.

Norman G Lussier
Norman G Lussier

it hurt the rich because they esually get all the Handouts.

John Stasio
John Stasio

I bet not many American Socialist idiots want to remember this Obama failure eh?

Bryan Beck
Bryan Beck

In typical Government efficiency taxpayers spent 26,000 per clunker, if you count the billions spent divided by cars ruined.

Jim Nowacki
Jim Nowacki

Another thing that was considered by NOBODY who pushed this disaster- poor people often can't afford to repair their cars, even if it only needs an air filter and tuneup. When a new car is purchased and a loan is needed, car insurance is mandatory. If someone can't afford to pay for a tune up or other simple repairs, how the eff would they be able to afford car payments and insurance?????????????????????????