Keep Your Clunker
The cash for clunkers or CARS program has appeared to help some American families, but from an initial look at the limited amount of Transportation Department data, the reality is that we are discouraging American automobile innovation, while neither improving the environment nor stimulating the economy.
Prior to being a stimulus star, cash for clunkers was part of the energy bill, intended to encourage motorists to purchase more hybrid and fuel-efficient cars and therefore reduce greenhouse gas emissions. While clunker motorists have purchased 61% more fuel-efficient cars (trades-ins had an average rate of 15.8 miles-per gallon and the purchased cars have a rate of 25.4 miles per gallon), further research shows that emissions will not actually be reduced. A recent CNW Research survey of CARS participants found that former clunker drivers are planning on driving their new cars 11,000 miles annually, as opposed to the 6,000 annual miles they planned to drive their clunkers (link). That’s nearly double the mileage and a 12% increase in consumption and therefore emissions. In addition, there has been no spike in hybrid car purchases, with only one hybrid car, the Toyota Prius, landing in the top ten new cars.
Secretary LaHood lauded the clunkers program as “the one stimulus program that I believe has been the most popular.” Popularity does not always equate to success. Cigarettes are popular, but they aren’t good for you, and neither is the clunkers program for debt addicted Americans. From the initial clunkers investment of $1 billion, the resulting debt is nearly $3.1 billion without financing and $3.4 billion with financing ($22,714 being the average cost of the top ten 136,000 purchased vehicles, and 6.42% the average auto loan rate for today). As for stimulus, the only reported jobs the program has created are two hundred more federal bureaucrats to process the clunkers paperwork.
LaHood also claimed that the program is “the lifeline that will bring back the automobile industry in America.” Giving the American auto industry a “lifeline” is not giving them the defibrillator it needs to jolt it back to life. While it may help suffering dealers clear inventory, it is also causing an artificial bubble in sales that impacts production. General Motors plans to increase its 3rd quarter production up 44% as compared to 1st quarter, gauging their demand from clunkers. What are we going to do when those cars are on the lots a year from now?
Lastly, and most importantly, the clunkers program is squelching the opportunity for Americans to create innovative, reliable and fuel-efficient cars that appeal to consumers worldwide. Of the cars that qualified for the first billion, only four of the top ten cars were American, only six are actually assembled in the United States and the only hybrid on the list is Japanese and not assembled in the United States (link).
It may be my yankee genes, but I am keeping my Japanese clunker. When you run the numbers, cash for clunkers simply doesn’t make sense for me or for America.
- Alicia W. Davis Downs
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