Weekly Roundup – Hands Off My Clunker Edition

Videos are now beginning to surface showing the destruction of perfectly good automobiles thanks to the cash for clunkers program. I fail to see the stimulative effects of disabling the engine of a car with thousands of useful miles in it for it to be scrapped and piled in an already overcrowded junkyard or landfill.

It is is especially troubling considering the number of people out there struggling to hold a job, or find work because of a lack of transportation. In fact, there are probably hundreds of uses for these cars. Why not donate them to shelters, churches, and high school shop classes or trade schools to train new mechanics? What’s next; the leveling of perfectly good homes if people agree to buy a new, slightly smaller one and accept $10k in taxpayer money to do it?

As for me, I’m keeping my 19 year-old clunker.

The Frugal Roundup

Debt Reduction – Emergency Fund Savings – The Balanced 75/25 Method. I’ve struggled finding a balance between debt repayment and building our emergency fund. The 75/25 method makes a lot of sense. (@Debt Free Adventure)

What Yoda Taught Me About Money Mastery. Points to Neal for working Star Wars into a personal finance post. I enjoyed the points made in the post. It is true that without teaching there is no learn (hey, I made a Yoda-ism!).(@Wealth Pilgrim)

Stuff Isn’t Always the Enemy. A nice perspective on the accumulation of stuff. Nothing wrong with a healthy collection. It’s when it becomes an unhealthy hoarding habit that it becomes a problem. (@On Simplicity)

What To Do With Your Money Just In Case Trends Forecaster Gerald Celente Is Right. I don’t subscribe to most doomsday theories, and this is no exception. However, I do think it is prudent to make basic preparations for unforeseen emergencies, natural or otherwise. (@Get Money Energy)

Are You Planning Your Life Around Money? The exercise described here as “begin with the ending in mind” works wonders for helping one form the proper financial priorities. (@Money Smart Life)

I Am Getting Fired: Looking At the Bright Side of a Bad Situation. While I was sorry to hear about Jeff’s situation, I was inspired by his response. He’s right, sometimes getting fired is just the “kick in the pants” we need. (@My Super-Charged Life)

32 Thought-Provoking Life Stories.  I read through each one of these stories, and each of them really “made me think.” (@Marc and Angel Hack Life)

Best of the Rest

Comments

  1. I saw a video of an engine on a 2000 jeep grand cherokee being killed….which was sad to see, since I am currently in the market for the exact same engine to replace in my 99 jeep! What a waste. Leave it to the government, huh?

  2. Amen!!!
    The entire program is crap. I seriously doubt the environment is going to be saved by throwing more vehicles n the landfill.
    In the area I’m in there is hardly any public transportation (and if you use what there is prepare for a 3 hour commute to work – I joke you not). When I worked in the shelter I saw people multiple times where their lack of transportation contributed to their homeless situation.

    Too bad I can’t trade my prizm for that volvo.

  3. Great point, I wonder if people realized these cars would just be junked? How does that Volvo even qualify? Don’t they have to get under 20mpg?

    I did have a laugh the other night watching the news and a video on cash for clunkers came up and there was a similar Jeep to the one I drive with a sign on the windshield that read – “Not For Sale – C4C” It may be 10 years old, but it only has 150k miles on it and still runs great.

  4. I heard Dave Ramsey rant about Cash for Clunkers. He says it is just another wealth redistribution program. Essentially, you are paying $4,500 to help buy someone, that probably can’t afford it, a brand-new car. It is your money that’s being used for this. Doesn’t that make you mad?

    The whole thing is a sham really. It was somehow draped in the idea that it is environmentally friendly, but that was just a way to make the whole deal easier for Congress to approve. After all, who is going to vote against something that is better for the environment?

    Sooner or later we are going to vote all these people out of office. I just hope it is sooner!

    Thanks for including my article on getting fired in your round-up!

  5. This is yet another example of how those of us who work hard, make good choices, and do the right thing are being gouged to support other people’s bad decisions and unsustainable lifestyles. With the C4C bill, my tax dollars are going to subsidize someone else who, ironically, has a higher standard of living than I do.

    Suppose the people currently trading in their “clunkers” (and apparently a 3-year-old Hummer qualifies) hadn’t bought overpriced gas guzzlers to begin with. Suppose they’d been willing to limit themselves to (gasp!) smaller, cheaper, and more practical vehicles. Then, over seven to ten years, the gas money they’d have saved over seven or eight years would have been worth as much, if not more, than the amount they’re being paid through C4C. If the cars had been smaller and less expensive to start with, the owners would actually be substantially ahead, with a healthier cash reserve or retirement savings.

    Instead, our government is cheerfully running us further into debt to subsidize:

    1) people who over-consumed by buying expensive gas guzzlers to begin with, and

    2) people who are willing to pay the extra price associated with having a new car instead of a 3-year-old one, and who are willing to go into debt to finance it.

    That which you subsidize, you get more of. Yet this is nothing new: we’ve been subsidizing corporate dishonesty and risk-taking for years through our massive bailout programs. We’ve been subsidizing other socially dubious behaviors, such as voluntary single teen parenthood or kicking an elderly parent out on the street, for even longer.

    Maybe if we stopped rewarding stupidity as a society we’d have less of it. As it stands, we are so seriously messed up that I do not know whether the next generation will have a functional economy to inherit.

  6. Shenanigans! The S40 does not qualify for the CARS program. I drove my van in on it’s death bed, and traded it in. Paid off and drove it till it (almost) died. Honda doesn’t know how to make a transmission for a large vehicle….

  7. I don’t have a car, so haven’t paid much attention to C4C… I hope people who have used it, though, are getting significantly more energy-efficient cars (otherwise the program seems to me to have been a waste, leaving aside the whole stimulus/no-stimulus aspect of it).

    Thanks for including my article in the roundup! I agree that Celente’s views are extreme, and some of them unnecessarily so. But I also agree it’s best to be prepared for any scenario.

  8. I am outraged at this, not only for the environment impact that the “junk” cars are leaving behind, but at the thought of the massive problems we will have in the future with repair costs. if your car, that you wisely didn’t trade in because you knew you could not afford a new car payment breaks down, and you try to have it repaired, where will you find a good used part now? Now we have more people with car payments they can’t afford, and people without car payments left without a cost effective way to make repairs.

    If these people couldnt afford a new car last month without the $4,500, do we really think they can afford a new car now.

    PLUS has anyone asked why the program is bankrupt after one week? Where did the BILLION dollars go?!?!?!? Anyone? How many cars were sold in one week that we blew through the money?

    All i know is if this poor planning is how they plan to save us economically, they better keep their hands off my healthcare!

  9. Some of those “clunkers” that are getting traded in would have made a good first car for my about to be licensed son…it’s harder to buy an inexpensive used car at the moment, since they are worth more in the C4C program than re-sold on the used car market. Too bad…they aren’t really all clunkers!

  10. The cash for clunkers program is another way to pay off the auto industry and the unions.
    Stay tuned, in about 6 months we will read about how all these people who spent $30000 to save $4500 are upside down and facing repo. I will drive my 10 yr old paid for car into the ground and then take one of these nearly new cars off their hands before the repo guy arrives.

  11. I believe this will just slow down the downhill ride of the car industry, once it is over, where are they going to get their money?

    I agree with many other comments that these cars should have been donated etc.

  12. It’s good to see that more and more americans see that communist central planning of economy makes no sense and brings only destruction and misery.

    Nationalizing industry after industry (mortgages, now car production, healthcare soon to come) will result in catastrophe. It can take decades to repair the damage to freedom and prosperity.

  13. Well…this harkens back to some actions by the Civilian Conservation Corps during the New Deal. You create jobs for people and pay them. It’s one way of stimulating an economy. I make no claims as to whether it makes sense or not; anyone who claims to understand this crazy f**ed up debt economy is a liar.

    Of course, I find it amusing in a sick way that we deal with a resource shortfall by destroying things. Kind of reminds me of 1984, when the nations engage each other in wars designed to cause minimal casualties and maximal destruction of expensive equipment, to stimulate the war economy.

    Cash for Clunkers is an interesting, but misguided, idea in my opinion. Give away free bikes instead with the same money.

  14. #10., Anne Marie: “PLUS has anyone asked why the program is bankrupt after one week? Where did the BILLION dollars go?!?!?!? Anyone? How many cars were sold in one week that we blew through the money?”

    ? There’s no mystery or conspiracy here: numbers show about 220,000 cars have been sold; if the gov is putting $4500 up for each, that’s already 990,000,000 dollars = pretty much a billion.

  15. I agree that it’s a shame that the engine must be disabled, because that could be reused.

    BUT – when a car is junked properly, 95% of it is recycled. It does not just end up in a landfill.

  16. CNN had a segment last night that says the c4c program is hurting junk dealers. Most of the money they get is from the engine. If it is trashed they still have the environmantal cost of dismantling the cars and safely removing fluids. Additionally the cost of towing and crushing the body. They don’t get much for the scrap metal. Perhaps we will have a cash for CARcass next to help out the junkyards.

  17. Most of these comments show lack of research. While the population is certainly turning in cars they should keep, that isn’t the governments fault. Can you honestly say that, given the choice of used cars available, you would purchase one that’s about ten years old with poor gas mileage? Come on, that’s the stupidest decision you’d ever make. The cars are stripped for all parts except the engine, as we are trying to get these environmentally unfriendly cars out of circulation. Then, the frames are crushed and turned into American made building material! Heaven forbid.

    Once again we blame the government and industry for our problems. As we have shown ourselves to be a nation of people who freaked out over cheap cars without considering if we need one or what it would cost overall, just like we were a nation of people who bought houses we couldn’t afford because the banks said we could. The lack of personally responsibility you hear is incredibly frustrating. Whether you like the problem or not, don’t blame anyone but the consumer for the fact that it took off like gangbusters.

  18. @Jessica: You have made some good points, but left out the financial aspects of this program. The fact it is costing taxpayers $3 billion dollars in money that we don’t have negates most, if not all, of the positive side effects of Cash for Clunkers, in my opinion.

  19. That’s very true. We know it’s expensive, and we also have o clue how much of the next $2 billion will get used or what percentage will be recouped with taxes from the sales. What I do know though, is that instead of reading everything and considering the pros and cons, most people I’ve talked to about this rail on and on without considering what part the American Consumer has played in using up that one billion. It’s like a Def Leopard album; one of the highest grossing album sale bands, yet almost know one admits to owning the record. A lot of people who needed new cars got them, and a lot who didn’t took advantage. And yes, this is the tax payers’ money–which a large percentage of the taxpayers are spending like gang busters unnecessarily. And yet it seems like everyone is complaining about the deficit. Interesting, right?

  20. Good grief, I wish conservative bloggers would bone up a bit economics. Yes the program cost 3 billion plus but it (for the most part) it is money well spent. The purpose of stimulus programs (more on Obama’s program in a bit) is the just that, to get the economy moving again. And this nothing simulates the economy better than car sales. The cash back program is just the thing to push a reluctant buyer over the edge.

    I know there are alot of conservative bloggers who prefer to see Detroit Michigan and California go over the edge (serves them right) and think the only choice is to let the markets work. Well I don’t know about you but I have no desire to be living in a hobo camp lining up at a soup kitchen because were in the great depression part 2.

    AS to the Obama Stimulus plan, I do agree with most bloggers on this one, for the simple reason it’s too little and too late. It’s mostly spent on welfare type payments and not near near enough on projects that will create short term employment (enough to get us through the worse).

    Unfortunately I expect Obama to be back for stimulus package nr 2.

    Well I don’t agree with everything Paul Krugman says I would recommend reading his blog as he makes some very powerful arguments against the conservative dogma on what needs to be done.

    PS hope it doesn’t come across as too argumentative, it’s hard to get the tone right when talking politics :)

  21. @Rob: Nope, the tone was just right, and your points are well made. We agree that there is little about the original stimulus package that was stimulative – and if there is any “stimulus,” it is backloaded to roll out later rather than sooner. Considering only 10-15% of the stimulus has actually been spent 6 months in makes me think an immediate boost to the economy was not the main priority – it was expanding the size of the government.

    Jury’s still out on Cash for Clunkers, since the administration will not release the numbers from round one. My guess is that consumers chose more foreign manufactured cars, and those on the higher end of allowable MPG ratings, frustrating economists and environmentalists alike. I know the program has helped local dealers, particularly those in the hardest hit areas, but I wonder where we’ll be when the program ends and demand again dries up.

  22. Thanks, btw I wanted too add that there is real concern over the sheer size of the deficts in Washington, the only good news, if you can call it that, is the Chinese are joined at the hip with us, we lose, they lose. Secondly and much more importantly Americans are starting to save, while it hurts in the short term it is overall good news for the economy.

  23. I fail to see how letting badly managed businesses die or be bought out by their competitors will put us in hobo kitchens.

    I can see how the added taxes will force me to a lower standard of living so my tax dollars can support those poorly managed businesses and people who spent with reckless abandon when I’ve always lived within my means.
    Most of these auto sales are being financed and too much debt/loans are what caused the problem with our economy to begin with. If people were paying cash for those cars then it would help in the long term however I just see a lot of auto repossessions or a car payer bail out in the future – I sincerely hope I’m wrong on that one.

    I also fail to see how it is the responsibility of a Democratic Republic to bail out a baldy managed private company.
    If you never allow a child to stumble & walk on their own they will never learn.

    BTW – My family restores classic Chevy & Dodge vehicles. I love chevies with a deep passion & hate Ford to a illogical almost religious level.
    Sadly, while GM & such were making the gas guzzlers & discontinuing smaller cars Ford was releasing the Focus. Ford was running their show like a business with a long term focus while the rest were focusing on the here & now. And yes, I know there was more to it for GM – like the union stuff but I’m trying to keep this short :)

    Oh & one other thing – 3 people here at work have traded their cars in for SUVs that get lower mileage then their original car. The mileage part is of their own admission – they “upgraded to a better vehicle since the govt is helping with the down payment” just like people upgraded their houses during the housing boom. I fail to see how that helps the planet.

  24. Interesting. As to the results, check the Wikipedia article on Cash for Clunkers’ sources (mostly in NYtimes, etc). It appears that a huge number of trucks are being traded in; and a fewer (but still large) number of trucks are being bought. The #1 tradein is a Ford Excursion and the number one new purchase is a Ford Focus.

    So it appears people are using this deal to downsize rather than just buy a new car. I can get behind that, though I’d honestly prefer that they be buying used. Not that I claim to understand economics.

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