How much did the Window cost? And perhaps a new malinvestment?

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Romantivist Posted: Wed, Aug 5 2009 10:32 PM

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So, I did some math.

According to http://www.npr.org/templates/story/story.php?storyId=111561543&ft=1&f=1001

the government has used 1 billion of our tax dollars to purchase 150,000 vehicles so far. Another 2 billion dollars are due to be spent.

The rebate is either 3,500 or 4,500 per vehicle, depending on how much of a 'gas guzzler' it is. Even if all 150,000 cars that NPR states have been traded were $4500 trades, that's only 675 million. So this is either an under-reporting of the real numbers or there are some huge (40-50%?) administrative costs.

One of the hidden costs is the cost of each perfectly good car that is destroyed (they seize up the engines). So if each car that was traded in is worth about $1,000, then

3 billion/4,000 (total expenditure/average rebate) = 750,000 cars set for destruction * $1,000 per engine destroyed=

an additional 750 million dollars of destroyed wealth, as a conservative estimate.

So we're talking $3,750,000,000 already.

I wonder how many people used easy, low interest loans with year-end close outs and cash for clunkers to buy a new car they really can't afford. I wonder how many of these cars will be reposessed.

Well, there will be a glut of new, fuel efficient vehicles available for purchase once interest rates rise again. I'll save my money (and my 'clunker') till then.

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Kakugo replied on Thu, Aug 6 2009 4:18 AM

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"Cash for Clunkers" was first introduced in Italy around 2003 if I remember correctly and it has been such a resounding "success" that most Western countries are adopting their own version of it. No need going over how it distorted the market and how many persons took yet another loan to buy the new car.

I was just going over the loan part with a friend who owns a Honda (motorcycle) dealership and he told me that he gets paid cash for each new loan he can get people to take: as he joked "I started out twenty years ago fixing and selling bikes and now I get to sell loans!". I bet it's pretty much the same all over the world.

Repossession? That's one of the few sectors that doesn't feel the crisis. In fact local repo agencies are actively recruting (not joking, job offers in the repo sector went up 150% in one year).

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Ansury replied on Wed, Aug 12 2009 4:22 PM

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Clunkers is getting pretty annoying.  Just today I saw a few ignoramuses on the local news talking about how people are really excited about it, how people that "wouldn't normally have been in the market" are suddenly buying, and how it's helping the auto industry.

I don't know whether to be disgusted, depressed, or angry.

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tmeyer replied on Fri, Aug 21 2009 10:05 AM

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Good thing there was no "cash for carriages" program in the early 1900s to save the horse and carriage industry