The Cash For Clunkers Program

Americans have been introduced to a new government rebate program called Cash for Clunkers that will offer cash vouchers to people who trade in their cars for the new more fuel efficient vehicles. This program was passed by Congress in June 2009 so as to help jump start the struggling auto sales and ofcourse to improve the environment.

The concept is rather straightforward - If you own a 1984 model or newer vehicle that has been insured and registered to you for the past one year and generates 18 mpg (miles per gallon) or less, then you qualify for the program. Ofcourse, the car must also be drivable. Now, if you trade this vehicle in for a car that gets an additional 4 mpg or more, you are presented a reward of $3,500 via a voucher. This voucher can be used while purchasing a new car. Furthermore, if you purchase an automobile that gets 10 mpg or more than your old car, then the government pays you $4,500.

Although the concept is good, people just can't seem to get through the obamanomics of things. The Obama administration is already telling lawmakers that the “cash-for-clunkers” program is running out of money. As the program was supposed to expire at the end of October, it appears to have run dry of the $1 billion allocated to it. For those interested on the program, check out http://www.cars.gov/

A lot of cars that the government is qualifying for a clunker are really good cars. Those who provide finance to people so as to buy cars could be hit, as the government has taken a lot of good cars out of the market and are hurting those people that cannot afford to buy a new car.

This here could be another unfortunate income redistribution program. It takes money away from taxpayers who have been driving fuel efficient cars and gives it to those who have been driving around in gas guzzlers for the past 20 years. Frugal, energy conscious people are being penalized. In other words, taxpayer money is being given to people to pay for their new car.

It is good, if you are bent on buying a brand new car and in which case, you will save money. However, the savings are nothing when compared to buying a used car. To be a bit more specific - new cars typically depreciate 20 to 30 percent in just the first year. By the third year, the car value is down by an average of about 45 percent! If the average sale price of a brand new car is around $28,000 and the average price of a used car is around $14,000, the savings achieved would be roughly $14,000 simply by letting somebody else buy a brand new vehicle!

The cash-for-clunkers program may be good in the long run, if it can in its own way, fit in with the alternative route of buying a second hand car of recent vintage.