Cash for Clunkers (CARS) ... Sells Out?

Discussion in 'Politics, Religion, Social Issues' started by mkrishnan, Jul 31, 2009.

  1. mkrishnan Moderator emeritus

    mkrishnan

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    #1
    http://www.nytimes.com/2009/07/31/business/31clunkers.html?_r=1&hp

    Something seems suspicious to me. The annualized sales rate right now is around 10M new cars, making for an average of about 830,000 cars per month. How on earth were there anywhere near 250,000 qualifying (I have a hard time imagining a high percentage of new car sales involve a qualifying trade, considering how old the "clunker" has to be) sales in a week? Even if a large number of these sales came from the 3-4 weeks before the CARS was officially started, they would still represent on the order of at least 20-40% of volume sales over the time period, which I just find highly unlikely.

    I wonder how many of these applications are legitimate?
     
  2. iShater macrumors 604

    iShater

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    #2
    It will be interesting to see.

    I guess I am not getting my new car. :(
     
  3. mkrishnan thread starter Moderator emeritus

    mkrishnan

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    #3
    You had a qualifying vehicle to trade? I honestly don't think I've ever in my life had a vehicle that, even if I still had it, would meet the criteria....

    I would suspect though that the money may not be so depleted as all that.
     
  4. yg17 macrumors G5

    yg17

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    #4
    I think the only age requirement for the clunker is that it's less than 25 years old (which I don't understand as a lot of cars older than 25 most certainly are gas guzzlers). The only requirement is that the old car has a combined MPG of 18 and the new one has a combined MPG of 22. So a lot of new cars are eligible, theoretically I could go out, buy a brand new Hummer, then trade it for a Prius and get the rebate.

    Of course, no one would do that, because if you qualify for the rebate, you likely won't get any trade in value for the old car since dealers can't resell it. So really, the clunker needs to be valued at udner $3,500 or $4,500 for the consumer to benefit, so that does effectively put a minimum age on the clunker
     
  5. swiftaw macrumors 603

    swiftaw

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    #5
    I believe that you also have had to own the car for a certain period of time to qualify.

    Edit: Here are the rules, the trade-in vehicle must:

    (1) be in drivable condition;
    (2) have been continuously insured, in accordance with State law, and registered in the same owner’s name for the one-year period immediately prior to the trade-in;
    (3) have been manufactured not earlier than 25 years before the date of trade-in and, in the case of a category 3 vehicle, also be from a model year not later than model year 2001; and
    (4) have a combined fuel economy value of 18 miles per gallon or less, if it is a passenger automobile, a category 1 truck, or a category 2 truck.
     
  6. yg17 macrumors G5

    yg17

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    #6
    Oh okay, so it has to be one year old then. I guess that's the only strict limit on age, but used car values will be another limit but that varies from car to car.
     
  7. swiftaw macrumors 603

    swiftaw

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    #7
    Except for category 3 trucks which cannot be newer than 2001.

    Also, must have owned the vehicle for at least a year and had it insured for that time, so can't be a vehicle that has been in storage.
     
  8. yg17 macrumors G5

    yg17

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    #8
    I think category 3 trucks are big work trucks, that probably doesn't affect too many people.
     
  9. iShater macrumors 604

    iShater

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    #9
    Nope, turns out that I did not. I missed the part about 18 mpgs, I guess I focused on the improvement in MPGs vs. the starting point.

    D'oh :p
     
  10. mkrishnan thread starter Moderator emeritus

    mkrishnan

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    #10
    Ahhh, I didn't realize that the age requirement only applied to Cat 3 trucks.

    Still, in essence it has to be a car or truck meeting the 18MPG as well as having a trade-in value of less than or about equal to rebate, or otherwise it doesn't really make sense to destroy it and apply for the rebate. Granted, there were lots of SUVs sold in the 90s that meet these criteria...

    I still think, all in all, that it's unlikely that the 20-40% of all new car and truck purchases in the last four weeks met that criteria. In particular, there really aren't that many cars on the road (i.e. that were continuously insured and then went as trade-ins just in the last month) that meet the 18MPG criteria. I mean, if those 250k apps are averaged over an extra month of time beyond the time the that the CARS was actually open, it still seems unlikely to me that 1/4 or 1/5 new car purchases in the US had trade-ins that met the clunker definition (even with how lenient the definition was).

    Or are dealers applying for rebates on behalf of people who bought cars an even longer period of time before the CARS went into action?
     
  11. rdowns macrumors Penryn

    rdowns

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    #11
    I'm sure dealers are taking shortcuts with the program.
    FWIW< a local news story on Long Island said a ton of SUVs were being traded. They reported from 2 dealers and both were packed.

    While these cars have to be destroyed, in fact, only the engine has to be destroyed. The rest of the car is fair game for parts.
     
  12. SilentPanda Moderator emeritus

    SilentPanda

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    #12
    Well... I just bought a new car on Monday (2010 Toyota Prius). Here is what the dealer told me. Of course dealers may/may not lie but whatever.

    You have $1 billion dollars. Let's say you get on average $4,000 per car ($3,500-$4,500 is the range). So you have 250,000 cars you can trade in. There are 22,330 dealers give or take. This is 11 to 12 cars per dealer. There are some dealers who have near 50-100 people lined up, especially in big markets. I don't think it's unreasonable that they would have run out already.

    Anyway my 16-19 MPG car was purchased by the dealer instead for $4500 instead of using the CARS program. The KBB was below that so even though I didn't use the CARS program I think I got a slightly better deal because of it.
     
  13. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #13
    ****ing stupid to destroy engines, they could be overhauled and resold, creating... jobs?

    This whole program is dumb actually, people are just digging up their old **** cars they never use and trading them in for $4500, I have 3 friends who all took some old shitmobile truck that barely had paint on it and traded it in even though they never used it anyways. How is that helping emissions?

    When will government learn? They would be much better served just taxing the **** out of gas if they want us to move to higher efficient vehicles. I imagine they will allocate some more funds out of our limitless pocketbook for this dumb program.

    Also I don't know who all these people are who bought gas guzzlers, even my z28 camaro which is 15 years old gets enough gas mileage to not qualify. Why are we rewarding people who bought SUVs/big trucks?
     
  14. CorvusCamenarum macrumors 65816

    CorvusCamenarum

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    #14
    Almost all the car commercials I see on TV here are advertising matching the incentive on your trade-in, which essentially works out to getting $7-9000 off the new car price instead of just the government deal.
     
  15. yg17 macrumors G5

    yg17

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    #15
    Well, I believe it's up to the dealers to verify eligibility and they have to do the paperwork to get reimbursed by the government, so if they fudge numbers or don't fully verify eligibility, they take the loss, so I would imagine that they're being very careful.


    That could be a manufacturer incentive they're offering, but they don't have to give you a rebate. If the dealer is shady enough, they'll claim they're giving you an extra $3,000 off and raise the selling price of the car by $3,000.
     
  16. SilentPanda Moderator emeritus

    SilentPanda

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    #16
    My understanding from the dealership was you fill out a bunch of paperwork and file it to the government. If anything is wrong they send it back and you have to submit it again but at the back of the line. So if you have to submit it a second time and they've run out by then yer screwed. If the rebate doesn't process it is the buyer and not the dealer that ends up having to fork over the $4,000.

    Also you are supposed to pay tax on it at purchase time since it's a rebate and not an amount off the purchase price. I've read that some people haven't had to but yeah... yer "supposed to".

    I did my research online to find out the dealers actual cost and what the average person was paying. Of course the mortgage situation shows people don't really do their homework before they sign anyway...
     
  17. mkrishnan thread starter Moderator emeritus

    mkrishnan

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    #17
    Are they paying customers before the government pays them? Or don't they just set it up so that the customer is liable for the money if the gov't doesn't come through?
     
  18. Peace macrumors Core

    Peace

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    #18

    Actually it's the drivetrain. From the engine to the real axle..I know. I just did it with my 1999 Isuzu Trooper.

    And as far as already having 250,000 qualifying cars. I believe it. They were selling like hotcakes where I live.

    What the car dealer does is give you a $4500 credit towards a new car. So if a car sold for $20,000 you paid ( or got a loan for ) $15,500. Less any other incentives the dealer may apply.
    Then the dealer sent in the paperwork for the cars program.
    I can see how there would be a backlog.
     
  19. yg17 macrumors G5

    yg17

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    #19
    Yes, it's deducted from the selling price of the car and the dealer gets reimbursed. I'm not sure who's liable if there's a paperwork problem, I imagine it would be whoever screwed up. But if dealers are smart, they're going over everything with a fine tooth comb before they give someone the rebate.
     
  20. rdowns macrumors Penryn

    rdowns

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    #20

    Reducing emissions is one small part of the program. The real benefit is all the economic stimulation that results in the sale of a car (which haven't been selling too well lately)- sales tax revenues, increased demand for auto producers, new insurance policies issued etc. This is exactly what a 'stimulus' program should do.

    As for the requirements, the cars traded in must have been continually registered and insured for the prior 12 months. Do a lot of people have cars that just sit?
     
  21. SilentPanda Moderator emeritus

    SilentPanda

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    #21
    The other thing I think it does, is just like when the U.S. started to "get their SUV on" it seemed everybody started getting them. Hopefully with 250,000 or so more fuel efficient cars on the road it might start swinging the other way. While none of my family, friends, or coworkers have gone out and purchased a car because I bought one, many of them have been very impressed with the ride which they may not have otherwise bothered.
     
  22. swiftaw macrumors 603

    swiftaw

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    #22
    You can only trade in a car that has been registered and insured for the last 12 months, so you would image if someone has done that then they plan on using the car. You can't trade in a car that has been sat in storage uninsured.
     
  23. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #23
    People are right to hunker down and not spend money, in order to stimulate the economy you need to produce programs that give consumers confidence that the economy is in an upswing. Giving away $4500 dollars that we will have to pay back later surely isn't doing the job.

    Have you seen the insurance costs for a crap truck out back? Its barely anything at all, and most people around here keep them insured if they run (not sure in other locations).
     
  24. SilentPanda Moderator emeritus

    SilentPanda

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    #24
    You don't have to pay it back later. At least not directly (I'm sure we're paying it back in taxes somewhere but not on an individual basis).
     
  25. yg17 macrumors G5

    yg17

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    #25
    I'm not sure where "around here" is, but no one I know just keeps a crap truck out back.
     

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