‘Cash for clunkers’ plan draws fire from critics

[IDemo]

Bill aims to boost sales of fuel-efficient vehicles; some question impact

By Roland Jones
msnbc.com
updated 2 hours, 30 minutes ago

A plan to boost auto sales by yanking old, polluting vehicles from the roads is gaining ground on Capitol Hill, but some critics say the proposal won’t work and should be dumped at the nearest scrapyard.

The bill, introduced by Sens. Dianne Feinstein, D-Calif., Susan Collins, D-Maine, and Charles Schumer, D-N.Y., offers drivers who trade in an older vehicle model with a with a fuel economy rating of 18 miles per gallon or less a $4,500 voucher toward a new, fuel-efficient car.

President Barack Obama has said he supports the idea. The plan would not only give a boost to moribund new-car sales but also have the added benefit of removing older, low mileage, pollution-spewing vehicles from U.S. roads, replacing them with cleaner, higher-mileage cars.

Similar cash-for-clunkers plans have enjoyed success in Europe. New-car sales rose last month in France, Italy and Germany, boosted by incentives of up to $5,000 for buyers willing to swap an old car for a more fuel-efficient vehicle. A similar initiative was approved in the United Kingdom this month.

http://www.msnbc.msn.com/id/30325553/

Here is a better idea, in my opinion. Offer incentives for the installation of a kit which will turn an
existing ICE vehicle into a plug-in hybrid for a relatively low cost (compared with buying a new hybrid).
This will keep the 'clunkers' out of the landfill a while longer by making them more fuel efficient.

http://www.poulsenhybrid.com/index.php

[FarCenter]

1. So the same small business crowd that got the 6000+ pound vehicle loophole get another tax break

It pays to be a real estate salesperson trading up to a new vehicle.

http://www.ucsusa.org/clean_vehicles/solutions/cleaner_cars_pickups_and_suvs/tax-incentives-suv-loophole.html

Tax Incentives: SUV Loophole vs. Clean Vehicle Credits

SUV tax loophole widens

A 1997 provision in the U.S. tax code (Section 179) provided small businesses with a tax write-off of up to $25,000 for a vehicle weighing more than 6,000 pounds- used 50% of the time for work purposes. The original intent behind this provision was to encourage investments in pickup trucks, minivans, and other needed service vehicles. A far smaller incentive was provided for cars—less than $7,000 over two years.

The explosion of SUV, pickup, and minivan sales in America’s passenger vehicle fleet has turned this small business benefit into a massive loophole in the tax law. Currently, 38 different passenger SUVs including the Lincoln Navigator, which nets a combined 15 miles per gallon according to the Environmental Protection Agency (EPA), the Cadillac Escalade (16 mpg), the BMW X5 (18 mpg), the Mercedes-Benz ML55 (16 mpg), and the notorious Hummer H2 (estimated 11 mpg) all weigh more than 6,000 pounds. This loophole allows some of the least fuel-efficient passenger vehicles on the road today to qualify for a significant tax break.

In 2003, the Bush administration proposed increasing the tax deduction to $75,000. Lawmakers responded by expanding it to a whopping $100,000 as part of the $350 million tax cut package. Yet Congress did not change the weight-based classification of the vehicles, creating a huge benefit for the largest, least efficient vehicles.

[sandnsea]

4. But-but... Americans *wanted* these cars

It drives me batty that nobody is telling the truth about why those cars sold.

[Howzit]

13. Only the H2 weighs over 6000 lb - where did you get your info?

2009 BMW X5 xDrive48i: Curb Weight AT 5335 http://autos.yahoo.com/2009_bmw_x5_xdrive48i-specs/

2009 Mercedes-Benz M-Class ML550 4MATIC: Curb Weight AT 4795 http://autos.yahoo.com/2009_mercedes_benz_m_class_ml550_4matic-specs/

2009 Cadillac Escalade AWD Platinum Edition: Curb Weight AT 5691 http://autos.yahoo.com/2009_cadillac_escalade_awd_platinum_edition-specs/

2009 HUMMER H2 SUV Luxury: Curb Weight AT 6400 http://autos.yahoo.com/2009_hummer_h2_suv_luxury-specs/


That said, tax incentives for gas guzzlers seems silly.

[FarCenter]

19. It is the "gross vehicle weight rating" over 6000 pounds

See for example http://www.sierrafinancialmortgage.com/newsletterPDF/2007/November07/KBCANewsletter-NOV07in.pdf for a more complete list.

Toyota made the mistake of coming out with an SUV that had a GVWR that was a little light -- about 5900 pounds, so they had to go back and offer a higher GVWR option.

See also http://www.cars.com/go/compare/trimCompare.jsp?acodes=USB70CHS111A0,USB70CAS011A0,USB70BMS191A0,USB70TOS131A0 and note the difference between curb weight and GVWR.

[Howzit]

26. What is especially sad is that these vehicles are often driven "empty"

as single commuter vehicles.

[anigbrowl]

37. It was a tax break on 'light trucks', and the SUVs technically fit that definition

Of course they are nothing lik trucks, but since the specification was made in terms of weight and cubic capacity they fit into it and lots of people bought a 'light truck' because there was a fat tax break for doing so. This is what happens when you subsidize an industry too heavily.

[Baby Snooks]

15. And that of course is how so many Realtors ended up with BMWs...

They incorporated and just collected their commission checks made out to their corporation.

And don't for one minute believe they weren't out there telling people they could afford a mortgage when they knew perfectly well people couldn't.

[FarCenter]

22. Yes, all those part-time real estate agents with the big SUVs

And the big business expense tax break.

[jmowreader]

28. The second sentence in this post is one of the biggest reasons for the crisis

Realtors and mortgage originators are paid on commission, and they don't get paid on the quality of the debt they sell--in fact, a lot of the time it's just the opposite. They definitely get paid on the SIZE of that debt.

Prime-rate debt is commissioned at 0.5 percent of the loan amount. It's probably twice that for subprime paper because it's harder to get it approved. Someone might be able to afford a $100,000 house at prime rate. He can't afford a $150,000 house, but he can get approved for one if it's an interest-only or negative amortization loan. Exactly how many $100,000 houses is he going to see? Maybe one and it will be the worst shithole imaginable. OTOH, he'll see dozens of $150,000 places--because THAT will gain the Realtor and the mortgage originator the largest commission.

(on edit:
"You said quality twice."
'I like quality.')

[Baby Snooks]

44. You got it...

It wasn't just the sleazy lenders it was also the sleazy Realtors...

[jmowreader]

45. Well...

Sleazy lenders

Sleazy realtors

Offshoring of high paying jobs

$8/hour big-box retail being considered a career

$165,000 starter homes

McMansions

House flipping

I started So...how screwed are we? by thinking derivatives were the whole problem. They aren't, but I knew it wasn't people rushing into real estate offices demanding to buy homes they couldn't afford like the Repukes say it is.

The most important causes of the disaster:

1. The income base contracted. This is it. If you can't deal with multiple inputs and want one cause for the whole disaster, put down "all the good manufacturing jobs are in China and all the good tech jobs are in India" as The Cause. How in hell are people going to pay their mortgages, if the jobs they used to qualify for those mortgages don't exist anymore?

2. The construction industry decided to stop building affordable homes. It's understandable why they'd do this--thanks to Lowe's and The Home Depot, the cost of building a 1500sf home is about the same today as it was 50 years ago. (Labor has gotten more expensive, but things like nailers, prehung doors and precut insulation batts have made it quicker to build a house today than it was 50 years ago, so labor costs are about equal.) If they wanted to make more money, they had to build more expensive homes--and "more expensive" generally means larger.

3. Then comes all the sleazy lenders, sleazy realtors and questionable securities.

[rvablue]

2. Hmmm. I don't know how I feel about this.

On one hand, it is a good thing to get these old polluting cars off the roads. And it would definitely help with sales.

But it seems to be that one would have to be able to afford a new car and I'm not thrilled at the idea that those who have SOME disposal income right now will be the ones to benefit from it.

A good idea. But maybe at a later date?? Jury is out on this one for me.

[Schema Thing]

3. The program in TX should be examined to see how it has worked

[Baby Snooks]

17. How did it work?

No one knows. I don't know that anyone has bothered to look at it. But one thing everyone knows. The dealers raised their prices to absorb the credit. Which means the buyer got absolutely nothing back from their clunker. No one does anyone in this country for the people. Only for the corporations.

[OHDEM]

5. There are other things that could make this program more...

...successful. Like raising the fuel tax. I didn't like paying so much for gas either and my husband HAS to have trucks for business, but if it motivates people to stop buying the biggest, most wasteful TANK they can find, then it's probably worth it.

[LeftyMom]

6. 18 mpg? 18 mpg? How old and gigantic does a car have to be to get 18 mpg?

How about "if you were driving an 18 mpg car and you can afford a car payment and full coverage insurance, we give you a swift kick in the taint?"

A trade-in incentive isn't a bad idea, but that's setting the standard so low almost nobody will genuinely qualify. Though I'd be half tempted to go buy an old beater truck that barely runs for a few hundred and trade it in just to take the credit. I'm sure you'd get more people like that than people going from their very own gigantic ancient POS to a brand spankin' new car. Is there a fuel economy requirement for the new car? Otherwise I think it might mostly benefit people trading in old gigantic pickups (the most plentiful vehicles with fuel economy bad enough to qualify) for newer, more gigantic pickups.

[MercutioATC]

12. My 2001 Audi gets 17MPG.

I certainly won't trade it in for $4500, but there are plenty of cars that are neither ancient not gigantic that get less than 18MPG.

[LeftyMom]

16. That's got a pretty big engine for the size of the car, right?

My sister's Mercedes is probably a bit lower than that (and only takes premium- she actually bought a small SUV as a daily driver to save gas,) but it's solid steel and has a gigantic engine, even though it's only a two seater convertible and barely bigger than a bread box. I don't think they'll get many European luxury cars traded in though.

But as far as common vehicles go, even a big old domestic land yacht gets better MPG than that. An early 90's Ford Exploder doesn't quite make it in under the wire (16/19 for the 4WD version, a bit more for 2WD.) Almost no common cars likely to still be in service would qualify, except for full sized vans, some very large SUVs (which would probably be worth more in resale and thus not traded in unless they were near mechanical failure anyhow) and full sized pickups.

I'd expect to see a lot of old beater farm trucks traded in, and not much else.

[MercutioATC]

18. Big engine, but all aluminum...only 4000 pounds.

Which, for a decent-sized 4-door sedan, isn't that heavy. A comparably-sized BMW weighs 600 pounds more.

[Mopar151]

29. Purty hi-tech, ain't we?

My '89 Grand Marqis weighs 4000 on the scale, gets 20-22 MPG commuting. Cost $700 on Craigslist 3 years ago.

[MercutioATC]

33. Yeah, but does it go 165mph?

One of my few vices...I love fast cars :)

Yes, it's completely irresponsible, but most vices are...

[Mopar151]

38. Ah got me 'noter'n fer that. n/t

[ConcernedCanuk]

39. Lemme guess - something along the lines of a Roadrunner /Superbee /Daytona /Charger /Duster . . .

.
.
.

with a hemi?

440 six-pack?

just guessing . . .

[Mopar151]

42. I'm much sicker than that

:evilgrin: <http://vermontracing.com/gallery2/main.php?g2_view=core.DownloadItem&g2_itemId=23843&g2_serialNumber=2>

if you're a lunatic motorhead, Dave Hughes brag page is here:<http://www.hughesengines.com/CustomerCars/johnreed.php>

[ConcernedCanuk]

46. OK - I was in the ballpark - "Duster" famous for that 340

.
.
.

I worked on a few

One quick engine that was!

Q?

Why the wide slicks on the FRONT wheels?

seems odd to me

[Mopar151]

47. Turns corners.....

Better'n them little Evo things, when i can get good tires.

[quiller4]

41. There are plenty of 2009 cars and trucks that get 18 mph or less:

Toyota 4Runner, FJ Cruiser, Highlander, Volvo V70, Ford Expedition, Dodge Viper, Dodge Caravan, Chev Trailblazer, Nissan Pathfinder, Nissan Quest...

[LeftyMom]

43. With the exception of the Viper, they're all quite big, and in many cases much bigger than older

versions of the same vehicles, which is what we'd actually see as vehicles submitted for the credit.

As far as cars that are old enough to be worth less than the amount of the credit ($4500,) new enough not to have increased resale due to collectors, and thus are likely trade-ins in this program, we're probably looking at cars from roughly the mid 70's through the mid 90's. So we have a fairly small pool of minivans and SUVs (introduced near the end of our likely pool of vehicles) which are likely to fall a bit above the dividing line (as I said, the Explorer was a bit too efficient, the only time anybody's ever said that of those pieces of crap) and mostly sedans and pickups. Some of the domestic land yachts of the 70s and early 80s might qualify on MPG (keep in mind they would qualify based on their official EPA rating, not whatever they actually get after all this time,) due to their heavy bodies and big engines, but mostly of that era we're going to be looking at pickups.

[sohndrsmith]

7. This does not seem like a new idea. Dealers have been

offering such incentives for quite a while. I know I've seen commercials from one that said it would take any trade-in, regardless of condition (in other words, clunkers and worse). This was at least a year or two ago, I believe. It's nothing more than another gimmick, I don't think. If it works, then their gimmick worked - good for them. Things like "cash back" and the like are just as arbitrary, aren't they?

I don't understand why this pitch is wrong, or who would determine what was wrong about it - unless they are willing to look into every other oddball "deal" rattled off by a zillion random businesses...

I'm confused, anyway. (Nothing new).

[LeftyMom]

8. Because it's a tax credit, not a dealer incentive.

Meaning taxpayers pay for it, not the dealer or the manufacturer.

[IDemo]

9. The new part is where the US government offers the incentive, not the dealer

I don't think the plan is necessarily wrong. It makes much more sense to me to "bail out" car companies from the ground up by putting money into the pockets of potential buyers.

[sohndrsmith]

35. Ah. Okay... got it. Were people up in arms when Obama was talking

about tax credits/incentives contingent on the purchase of hybrid/fuel efficient cars during the campaign? This must be different. I guess it's time for me to get back to research because I'm obviously not up on the details here. Sorry about that.

[Warren Stupidity]

14. The dealer never gives you anything.

If they have a minimum trade in value then they have added that into their price. Same with financing incentives. It is all floor mats and undercoating.

[demodonkey]

20. Aren't you supposed to get the price first and THEN say that you have a trade? nt

[Codeine]

30. American schools should have classes

on buying cars. I'm amazed at the number of people who make elementary mistakes like this, or who allow the dealer to sell them a car based on monthly payments rather than total price. Or - worst! - pay actual sticker.

[Warren Stupidity]

36. That is when the dealer informs you that the minimum does not apply

to trade-ins not mentioned up front.

Yes of course, negotiate hard and smart, but the programs and packages offered by the dealership are almost invariably bogus.

[demodonkey]

48. Then that is when I would say bye-bye... and start heading for the door... bet the salesman would...

...go to his/her supervisor and suddenly the minimum WOULD apply. Or else I would actually leave and shop elsewhere. No loss for the buyer, there are plenty of dealers who WANT your business.

Car buyers are not exactly growing on trees these days. One ready-to-sign buyer hitting a dealbreaker like this and heading for the door is a big loss for any dealer.

[FarCenter]

24. Don't forget the anti-theft etching on the window and the extended warranty

[lumberjack_jeff]

10. I guess american society isn't disposable enough yet. n/t

[Mopar151]

32. Hot rodders line up to fight these things

They are usually worded in such a way that useful cars, and especially parts, cannot be reused or recycled, and must be shredded.:evilfrown:
How about we ask people who LIKE cars to help out with some ideas? I'll give you one - make it much easier and cheaper to add an efficent 2nd car, so that folks won't be forced into commuting in a vehicle they only need weekly.

[old mark]

11. Be better if everybody had a job first. The Government could

then sell all those old clunkers to Cuba in exchange for the '52 Chevys, Fords and Cadillacs that are driven there now. There they are just cars. Here they are classics.
Win-win.
mark

[Deja Q]

21. I'd otherwise say "bite me" to the critics, except I don't want a bunch of Lorena Bobbitts on my...

tail.

[I Have A Dream]

23. Interesting that they have Susan Collins as a Democrat.

:shrug:

[itsrobert]

25. That jumped out at me too

:shrug:

[Howzit]

27. Incentives are fine, but forcing people to buy new vehicles is short sighted and cruel

If a poor or job-less person owns a nearly worthless gas guzzler and uses less than $50 worth of fuel a month, why is this such an affront to anyone's sensibilities? Forcing them to buy new or used hybrids or other "approved" vehicles is a massive burden.

By all means offer incentives to stimulate and "green" the economy, but banning old or large vehicles that pass current emissions laws cannot be justified except by those building and selling new vehicles.

[Codeine]

31. For that much you can get

a decent used used car with good mileage and lots of driving left in it.

[Howzit]

34. If a poor person spends their $50 a month on a used car, what do they use to pay for fuel?

Buying a cheap used car may be smart, but it can also cost you lots of unplanned expenses when you discover why the previous owner didn't want it. Stick with the devil you know: Assuming your car is already paid for, poor MPG is only a factor if you drive a lot of miles.

[havocmom]

40. sniff sniff... I smell insurance industry in this one. Older cars are heavier

and inflict more damage. Am I that cynical? Why, yes I am.

Saw a kid in a BMW get antsy, wanting to turn right on a red light. Problem, the 85 Buick in front of him. He hit it and just mangled the crap outta his beemer. He was pitching a fit and his girl friend was sobbing like it was the end of the world. The very modestly dressed worker bee driving the Buick kept trying to console them, pointing out that they had hardly scratched his car and there wouldn't be a lawsuit.... I laughed so hard I almost peed my pants, which would have been bad at a bus stop. ;)