The Cash For Clunkers Program 2009 instituted by the Obama administration seems to have gotten off to a great start. The Cash For Clunkers Program is the government’s incentive program that entices car owners to trade in their older vehicles for more fuel efficient newer vehicles. The Detroit Free Press reported Tuesday that Detroit area car dealers are satisfied with the turnout generated by the Cash For Clunkers Program 2009, which is officially known as the Car Allowance Rebate System (CARS).
The Cash for Clunkers Program (CARS) was set up to provide vouchers through registered dealerships to prospective car buyers replacing a car or truck that averages less than 18 miles per gallon in combined city and highway driving (and is less than 25 years old). The Cash For Clunkers Program 2009 runs until November 1, or until its $1 billion budget is gone.
Jim Seavitt, owner of the Village Ford dealership in Dearborn, Michigan, to the Free Press, “It is bringing people into the marketplace that we wouldn’t have seen and it is spiking business.”
One example of why the incentive is working well is that of Dennis Wagner, who will get a voucher for anywhere between $3,500 to $4,500, which is far more than the $1000 trade-in value that his 1997 Mercury Grand Marquis would have gotten him without the Cash For Clunkers Program.
But the Cash For Clunkers Program isn’t sitting well with everyone. Part of the requirements of the Cash For Clunkers Program is that the cars that are traded in be completely demolished, including the gas-guzzling engines. According to the Associated Press, used engines and drive-trains account for up to as much as 60% of a recycler’s take from a used car. The Automotive Recyclers Association maintains that to destroy reusable pistons and smaller reusable parts accounts for anywhere between $1200 and $1700 from a typical recycled vehicle.
Michael Wilson, executive vice president of the Automotive Recyclers Association, doesn’t get it. “Why throw away good parts when the supply chain is in jeopardy? It doesn’t make a whole lot of sense.”
It is estimated that the Cash For Clunkers Program 2009 (CARS) will increase auto dealers profits by as much as 10% and could put as many as a quarter million people behind the wheels of new, more fuel efficient automobiles.
But the Cash For Clunkers Program 2009 is indicative of a government program that has not been completely thought through to ascertain better outcomes or unintended detrimental consequences. It will no doubt produce economic benefit and stimulus to some areas of the economy — certainly ailing dealerships — and it will proive marginal profitability for junk dealers and recyclers. However, it will eliminate used parts for a market that relies on them — people who own older cars and people who deal in said parts.
But, then, that is partially what the Cash For Clunkers Program 2009 is all about — making the world greener and producing less carbon emissions while providing a stimulus injection into an economic sector that sorely needs it. So the consequences may not have been unintended after all.
Not everyone benefits from change.