Cash for Clunkers
Published July 27, 2008
Consider two facts. First, it takes about 20 years for all vehicles on the road today to be replaced with newer, more efficient cars. That turnover rate could become even longer, because the economic downturn has left fewer people able to trade in older cars for newer vehicles, especially hybrids, diesels and some high-mpg gasoline options.
And second, the most polluting cars on the road are the oldest. A study from California estimates that cars 13 years or older account for 25 percent of the miles driven—but 75 percent of pollution from cars. Officials from Texas say those clunkers spew 10 to 30 times as much pollution as newer cars.
Put the two facts together, and you can see why a handful of states—including California, Texas, Colorado, Delaware, Illinois, and Virginia—have started “Cash for Clunkers” programs. Texas offers as much as $3,500 for low-income consumers to ditch their clunkers and buy a new car. California gives $1,500 to help retire vehicles that fail emissions tests. And beginning in 2009, Canada will use a similar strategy to remove 50,000 clunkers from Canadian roads.
Alan Blinder, a professor of economics at Princeton, would like the United States to launch a similar program on a national basis. His idea is for the government to set above-market buying prices—say 20 percent higher than Kelly Blue Book values—for vehicles older than 15 years, and make those attractive prices available to families with an income below $60,000. The worst gas-guzzlers might receive an extra premium. The government would buy the vehicles—and sell them to licensed recyclers, scrap them, or retrofit them with emissions controls before putting them back on the market.
Besides removing the most polluting cars from the road, there are two other compelling reasons for a Cash for Clunkers program, according to Binder. Because most clunkers are owned by low-income people, a government buy-back program would transfer purchasing power to the poor—like an economic stimulus program on wheels. Recipients would have more cash in their hands, which they could spend as they see fit. He estimates that a national program would cost somewhere between about $8 billion and $20 billion—much cheaper than the $168 billion stimulus package enacted in February.
The other benefit, according to Binder, is to give the ailing auto industry a “shot in the arm.” Auto sales in 2008 are at a 20-year low. The Cash for Clunkers program could scrap 2 million old cars a year, and encourage those drivers to trade up to new models.
Email
Print
Digg
del.icio.usRelated Links
Most Popular Pages
Free Email Newsletter Sign-up
All the latest news in a free and engaging bundle. Totally free!
This country needs to adopt what Japan has...where cars are required to be renewew within a certain time period.
Of course it'll never happen here because God forbid we trample on stupid people's freedoms.
Well....did anyone think that some people just may wait LONGER to get r id of their old clunkers so as to get this rebate like program thing.....thus polluting more. Just thought I would throw that out there. And what about people who just buy old clunkers for nothing and then go to Big Bad Government and say they want a new car but they need them to help them.......and hand them a big check while you are at it. O.....let the scams begin.
yea......damn those liberties and freedoms......who would want that......rofl.......you entertain me as usual Noz.
Great Program :-(
pls help me do the math:
Buying a chunker for lets say $1.000 because more u cannot afford. Drive it 3 yrs.
Gov gives you $3.500 and you can trade-in your chunker for $1.000. Great deal on the chunker. But what "new" car is avail for $4.500. So if you have nothing you'll get nothing. If you're more fortunate you can milk gov but the program will not reach the real poor people.....
The skeptics (e.g., Bryce, Andreas) make some good points. There would have to be some safeguards and foresight to make sure that it by and large has the impact desired and scams are eliminated or minimized. Perhaps the states mentioned have these in one fashion or another. This article was an overview and did not have many specifics.
Also, it seems to me that the state governments mentioned here are essentially paying poor and low income people not to drive (the polluting cars which they can afford). In addition to/instead of this would expanded, subsidized mass transit make more sense? It would have the advantages of this program and cut way down on single occupancy vehicles.
O man, I am always "the skeptic." lol As for as I can tell though, this program has a lot of loopholes that could be exploited by those looking for a quick buck and hopefully would be closed quickly before our tax dollars go into the pockets of some swindlers.
*takes off skeptic hat*
First - I do think there is room for fraud - there is room for fraud in every single thing the government engages in - so shoudl be paralyzed and do nothing?
Second - as Bill states this is an overview so there are no safe guards. Example - mandatory period in which you must own the car? Is it drivable? Etc?
Third - Noz - don't worry the citizenry here in the good ol' US of A are ceding their rights faster than you can say terrorist attack.
Fourth - I think Bill hits the nail on the head. Instead of removing these cars from the road - remove the need for people to drive them - better mass transit, cheaper, more efficient, etc.
The CA program has requirements. For instance, the car has to be currently registered, so you can't drag some junker out of a backyard after 20 years and get the cash.
These programs, however, also tend to terrify old-car collectors who fear (with no particular examples, AFAIK) a mandatory element that translates to, "The gummint is going to break into your garage and take your pristine 1965 GTO convertible AND CRUSH IT!"
Sigh.
We have such a program in British Columbia, Canada. If you crush your old clunker you get $750 coupon towards a new car.
If you want, you can get $500 worth of bus passes or a coupon towards a new bicycle. This system works well as far as I know.
I noticed that one of the reasons people keep their old cars is the fact that you sometimes get better fuel efficiency from an 1990's hondas, mazdas etc... than from a new car. The newer cars are much heavier and that negates most of the efficiency benefits from newer engines. For example the old civics (1.5L 4cyl) get like ~6L/100KM in the city....which is better than a new Yaris. :)
It depends how you drive your car though.... so slow down and keep your speed closer to the speed limits people.
Forgive me but I have not looked at the current states that have cash for clunker programs. I need some help in understanding this, Say there is a 88 Ford Escort and the Blue Book value is $500 for the buyback program, could it be possible that older cars would retain a higher resale value? Also could it be possible that a seller would charge a high price for the $500 car, say $1000?
If thats the case, sorry doesn't sound like the best way to go :(
The goal appears unclear to me. Is the goal to get clunkers off the road, or is it to get money to the poor.
If the goal is the former, why only give the $3500 to clunker owners who are poor.
In addition, if one is required to buy a new car to replace the clunker, how many poor families can afford a new car after using the $3500 for their down payment?
If the government pays $3500 to get a clunker off the road, does it matter whether the clunker was owned by a poor or middle class family?
The goal appears to be to get money to the poor.
Four years ago, I was offered $300 trade-in for my 1993 Eagle Vision TSI with 152K mileage. I decided to keep the car as an extra. Now, four years later, it has 198K and is still going strong. I don't view it as a clunker, but it is 15 years old.
And my 1993 Eagle Vision is far cheaper to operate and has better performance than if I would buy and finance a comparable Prius (leather, sunroof, and 350 watt Infinity Stereo.)
Bryce, you consistently miss the point by a mile. This is an auto manufacturer subsidy. By means testing the incentive, it also redistributes income.
Study!
Make the poor people take the bus, while those with means enjoy automotive autonomy... hardly seems fair.
The study that lead to the cash for clunkers program was done in the mid-80's. That same study also looked at Freeway Service Patrols as a method to reduce the non-productive pollution of cars idling on the Los Angeles Freeways because of breakdowns and accidents.
Best part of the study: it was conducted by business and not the local AQMD - who are way too rigid to think outside of the box. That company, an Oil company - Union Oil of California, aka UNOCAL. They were trying to offset some of their refinery pollution by doing a good deed for the public.
hmm, I was wondering why this whole thing sounded kinda fishy.
Of course the potential for fraud is there as in all human activities - not just government. But leave that aside. A number of controls can help - registration of people selling back cars, limiting the number they can see back over a certain period... But regardless, the point is to get these inefficient polluters off the road because we all breath the same air and depend upon the same limited natural resources. That is simple reality. (Been following the efforts of the Chinese to reduce pollution during the Olympics? Even when they tried under an authoritarian regime they still had trouble - shows how bad things can get if we don't pay attention. I am old enough to remember when the Cuyahoga River caught fire. But I digress.)
I would take things a step further. Establish a program to replace all of these vehicles as quickly as possible with inexpensive hybrids. Offer low income folks vehicles for the value of the rebate given in exchange for their clunkers - have a graduated scale that eventually reaches full price for those of us who can afford it. How do we get the price down? Volume and lack of variety. Have one model, limited number of colors, not interior options, ect. for those getting the best deal. This will get the technology out there, reduce the price, and transform our economy. Imagine the number of jobs created by such an effort and the boost to our economy. Best part is that everybody wins.
Post a new comment