Sunday, July 19, 2009

The "Cash for Clunkers" Swindle

Perhaps you've heard of 'cash for clunkers" -- that Obama stimulus program where he takes your money and mine -- up to $4500 per car -- and gives it to people to buy a brand-new more fuel efficient car. Sounds great doesn't it? Get rid of your "gas guzzler" and the taxpayers pay $4500 of the cost of a new one for you. You get a new car and the taxpayers get screwed.

Ostensibly, this new program is designed to get "clunkers" that get poor gas mileage off the road and get you into a car the government deems more "environmentally friendly". Aside from the fact that it's none of the government's damn business what you or I choose to drive and it's not the government's business to incentivize one type of car at the expense of another, what's wrong with this program? Simply, the utter unconstitutionality of it all and the fact that the government appears to be gaming the numbers to create qualifying "clunkers". And these "clunkers" happen to be the types of vehicles the lefties hate other people to drive -- SUVs and minivans.

Case in point: The two of the three vehicles in my household, both of which are minivans. If you visit it describes in detail how this scam works. The Cliff's Notes version is that you can get up to $4500 in government credits taken directly off the price of a new car for turning in your "clunker" that gets an EPA average 18 MPG or less in combined city/highway driving. The dealer that gets your "clunker" is then required to destroy it. You can find out what the EPA average for your current car is by visiting and looking up your car. The scam is that the EPA has "new estimated mileage rates" that appear to vastly underestimate a "clunker's" actual mileage.

For the first example, the EPA rates for my 1996 minivan -- 17 MPG -- are a good three MPG less than the actual reported mileage, putting my 13-year-old minivan solidly in the "clunker" category. The owner reported average -- 20.2 MPG -- puts this same vehicle well over the mileage that would rate "clunker" status. Which is more accurate, actual owner experience or the 2008 EPA estimate for a then-12-year-old vehicle? I have every reason to believe that the average reported by 5 owners for the vehicle in question is absolutely accurate. Why? Because it matches the overall average of my 125,000-mile experience with this vehicle almost exactly. So the only conclusion I can come to is that the EPA is rigging the numbers in order to entice owners with the taxpayers $4500 in cash for their approximate $2,000 vehicle, get them off the road and destroy them.

This is only one vehicle right? The mileage estimates for others are probably a lot more accurate. Not for my 2004 minivan with 135,000 miles on it. In all those miles, the mileage calculator usually sits right around 20 MPG. The history since it was last re-set in January -- winter, spring and summer driving conditions; stop and go traffic, trips of 400+ miles -- is 19.9 MPG. The EPA "new 2008 estimate"? 18 MPG -- low enough to qualify it as a "clunker" if the resale value wasn't already far more than $4500. In a few years, they'll be paying owners of perfectly good Dodge Grand Caravans $4500 to have them destroyed on the taxpayer dime -- 6-disc premium sound DVD changer and all. Again I ask you, which is a more accurate "estimate" of the gas mileage you get out of a 2004 Dodge Grand Caravan SXT 20th Anniversary Edition? The EPA's "new estimate" or 135,000 miles of real-world experience in all driving conditions in all kinds of weather? (After all, I live in Iowa where it's 20 below in the winter and 90+ above in the summer.)

Just to make sure there wasn't some kind of anomaly involving 1996 Mercury Villagers and 2004 Dodge Grand Caravans on, I checked a few other cars -- ones that I've owned in the past and ones that family members own now. Every single one of them was rated a good 2-3 MPG below the actual mileage the owner was getting out of that car. Most of these mileage figures were skewed low enough to put the vehicle in the "clunker" category and qualify it for destruction even though the vehicles were perfect serviceable and will be for years to come. My 13-year-old Villager with 175,000 miles on it is good for another 175,000 miles and I'm certainly not going to send the taxpayers a $4,500 bill to have it destroyed and replaced with a brand-new car and a car payment to go with it. Would that be any way to treat the most reliable vehicle I've owned in my 30+ years of driving?

Am I detecting a trend here? Just what is the agenda of the EPA's "new mileage estimate'? If I didn't know better, I'd say that the it's goal is to get old cars off the road and replace them with tiny little boxes of crap that hold four people in extreme discomfort and get 40 MPG. Never mind that my 13-year-old van will carry six people and all their luggage across country in relative comfort at 70 MPH and get 24-25 MPG -- a feat that makes it more economical that the two tin boxes of crap that would be required to transport the same six people and all their luggage across country. No my relatively economical vehicle is considered a "clunker" by skewing the mileage numbers down so that the feds can remove one of the cars they don't approve of from the road and saddle some poor sap with a car payment they can't afford for a "brand-new" car they didn't really need in the first place.

The Messiah will tell you I'm being cynical. This program is meant to "stimulate the economy" and "revive the auto industry". But if this were the only goal, why destroy perfectly good cars that could be viable and economical transportation alternatives for lower wage earners who can't afford brand-new cars? In general, most cars built after the late-80s and early-90s -- fuel injected, computerized, distributor-less ignitions -- will last for several hundred thousand miles if properly maintained. And it's a hell of a lot cheaper to maintain an older high-mileage car than it is to make the payments on a new one.

Which brings us to another fact: The "clunkers" in question are already the "niche" vehicle for lower-income households. Do you think the folks who can actually afford a car payment are driving 13-year-old cars with nearly 200,000 miles on them? If they are they are like me: Most are driving this car as a second car while making payments on a newer car and most have the good sense NOT to take on a second car payment. Those that do take on that second car payment -- even with the $4,500 credit for buying a brand-new car -- are probably overextending themselves. After all, those of us who live in rural areas and drive the living snot out of our cars can have 150,000 miles on a "brand-new" car before it's even paid off. That's where I'm at right now. So the primary market for these older high-mileage vehicles on the EPA's "clunker" list is as the one and only car for lower income households and young people with lower incomes -- the exact people who can't afford to buy a brand-new car regardless of whether or not they get $4,500 back from the taxpayers. With the average price of a new car at better than $20,000, even $15,500 is a big chunk of money for a lower-income family to pay of even over a period of 72 months.

This is exactly why this "cash for clunkers" program is hardly an economic stimulant. Many folks who live paycheck to paycheck are going to be enticed into taking on a car payment they can't afford by turning in their old car to be destroyed for a $4,500 credit and a car payment. Now we're stuck with a bunch of newer cars these folks can't afford and a drastic reduction in the supply of good older cars that they can afford. Kind of the auto version of the housing crash created by the Community Reinvestment Act. Just another ill-conceived "stimulus" created by liberals -- and another huge bill for the taxpayer.

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