Unintended consequences of Cash for Clunkers

by Gary Coe

Cash for Clunkers has been another failed stimulus of the Obama administration.  The program took 800,000 cars, pickups and SUV’s out of the car market.  The criteria for what was a “clunker” was based on miles per gallon, not the condition or value of the vehicle.

Dealers were required to drain the engine oil, and replace it with a chemical that caused the engine to seize and resulted in no useable engine parts.  The vehicles then had to be sold to a licensed auto wrecker, who could part it out or crush the vehicle.  There was such a volume of cars accumulated at dealerships that our towing company worked on weekends to get them all moved.  Other than the government-required spiked engines, many of these were very viable used cars.

The result has been an estimated five-year vacuum of available used cars.  Note that many used car lots now look sparse or they park their inventory at an angle to make their lot look less sparse.

Our towing company holds a public auction every Tuesday in which we sell over 200 cars.  We now have used car dealers paying close to retail prices, just so they have inventory.

Between the vacuum in the market caused by the Cash for Clunkers program, and the demand for steel in both China and Japan, the cost of used cars is up across the entire range of vehicles. The poor, who are least able to afford inflated costs, are now having to pay more for used cars.

The Cash for Clunkers program provided a short-term economic spike for a select few, but like other government attempts to stimulate the economy, many more Americans will be paying for that spike for years to come.

Gary Coe is a small business owner, past President of the Central Eastside Industrial Council and Republican candidate for Senate District 14 in Beaverton.