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.

 

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Posted by at 05:00 | Posted in Economy, Oregon Senate | 476 Comments |Email This Post Email This Post |Print This Post Print This Post
  • And I’ll bet Obama thought he was creating wealth by destroying perfectly good cars.

    Well maybe he will succeed in driving some poor people out of their cars and on to public subsidized transit that costs five times a much as a car, takes twice as long to get to fewer destinations and does not save energy. Bet, Obama also thinks this is a good thing.

    What idiots.

    Thanks
    JK

  • Steve Buckstein

    Gary, thanks for bringing to light some of the unintended consequences of this faulty government program. John Charles explained the harm it would do to poor people and other negative effects in a TV interview as the program was set to start in 2009. It’s online at
    https://cascadepolicy.org/news/2009/07/22/john-a-charles-jr-featured-in-katu-2-story-on-the-%E2%80%9Ccash-for-clunkers%E2%80%9D-program/ 

    • Roadloans

      Steve, lol amazing how clearly people like John Charles were able to predict the future with such accuracy. His analysis was right on the money. Nice work!

  • Bob Clark

    I heard in some European countries you are required by government to replace your car with a new one every four years.  This was according to an Austrian tour guide back in the 90s.  Such a program doesn’t even seem like it would be very green as remaking a car every four years would take a lot of energy and other inputs.  It is especially not very green for the likes of me who maybe drives three thousand miles per year or less.  But boy having a truck or car to drive these 5 mile, or so, plus type trips is very productive for me.  Then, too, it doesn’t make a whole lot of sense for me to buy new for such a low level of driving need.

    I’d go for a cash for clunker-big-government program, though. Turn in your bloated government (such as the one Bama and Bush II stuck us with), and get limited government for free. 

    :>)

  • Anonymous

    And people criticize me for calling him Obozo. Do you guys get it now?

  • Roadloans

    As an Oregon Auto Dealer I can verify everything Gary said regarding the current state of the used car market (prices) The official industry line states: “according to the Manheim Used Vehicle Value Index, used car prices dropped a
    little in September from August, though are still relatively high. The index peaked at 127.8 in May, and now stands at 122.9.
    In a separate report, ADESA Auctions claims the average used vehicle price in
    September was $9,742, a 1.4% decline from August. Large SUVs averaged $12,584
    per, up 2.5% from August, but down 10% from September of last year. ADESA says
    $4 gasoline is the culprit for lower prices” (yeah right)

    If used car prices are softening then nobody bothered to tell the other people with their hand in the air at the various auctions I attended about it. Quality used cars are in short supply…as the Speeds Towing impound auction heats up so has the copart crash and smash auction. The other thing we are seeing are more and more unemployed people bidding up prices at auctions that are open to the public and everyone has become a P/T auto dealer trying to make a few extra bucks flipping cars on the side just to keep a roof over their heads. 

  • Tim Lyman

    Thanks to cash for clunkers, the 1997 truck I sold for $3000 four years ago would cost $4000 today.

  • And I hope you are banning the illegal aliens from buying cars at your auction, too. If they want to participate in our economy they can do it the legal way, not by black market,  unofficial auto repair and reconstruction businesses.

  • Garyisalooser

    Gary – you are a fn looser fro towing a single moms car was legal to park where she was – just her permit was showing- lost my vote!

  • Garyisalosser

    Gary you are a fn looser! towing a single Moms car- she has to return her kids christmas presents to pay your bill..she had a permit . just wasnt showing it in the window- lost my vote- looser! 

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