Cash for Clunkers Final Numbers

[b0mbrman]

Originally posted by: Engineer

Originally posted by: rchiu


Really, are you sure all these 690k cars wouldn't be purchased if not for this program? All the program did was to give people incentive to buy cars right now. It is not new demand, it is just an artificial spike in demand right now in the expense of future demand.

But hey, what does politicians and their backers care. As long as they can claim something now, who cares about the future.

You ask dullard if he was sure, but are you sure? Going from 17 million cars per year to 9 million cars per year is quite a drop. Pent up demand at some point will drive sales to a more normalized rate of 'probably' 12 to 13 million units (within the next 1 to 2 years, IMO).

From the looks of this thread, those who participated in Cash For Clunkers both:

• * bought cars that they were going to buy anyway in the very near future, so Cash For Clunkers just shifted demand and;
  * were tricked into buying cars that they wouldn't have bought otherwise, so Cash For Clunkers just created a bunch of loan defaults

 

[tk149]

Originally posted by: dullard

Originally posted by: tk149
Normally, Dullard, I have a lot of respect for your numbers, but the government didn't "double it's return." By your own estimates, it's only getting half of it back.

The government simply time-shifted sales. You can claim that most people who used the Clunkers program can afford their new car, but nobody really knows that for a fact. Only time will tell. The one thing that we do know is that the American public loves to buy things on credit.

Both of you sure like to nitpick fine details and ignore the forest. I clearly stated that the government didn't get all of its money back, then you claim that I said the goverment got double its money back. Please, try a bit harder to think next time.

The government spent X. US companies directly got more than 2X. Call that what you want. So "double the return" was a bad choice of words, but you completely missed my point. In one case the goverment was finally highly EFFICIENT (ie the US got more benefit than the money the government spent) and you complain. If the government was highly inefficient, you'd have a right to complain.

tk149, As for affording the car, either (a) they paid for it outright or (b) both the buyers and a bank thought that they could afford the car. Sure, some will default. But history has shown that most people that buy cars do pay it off. With the recent extreme vigilance of bankers, I have no reason to expect that history will change. That is why I claimed that most will probably pay it off. Do you have any shred of evidence otherwise? Or are you just going to blindly claim that the buyers and the bankers were overwhelmingly wrong and that history won't repeat itself?

You stated "the goverment doubled its return" then went on to talk about the government recouping half based on a 25% tax rate. You admit that it was a bad choice of words, and I called you on it. Why the hostility? Please try writing more clearly next time. I only wanted to point out your error because I believe that people on this board (including myself) do respect you and give great weight to your opinions.

Since you want to argue the point, where is your evidence that in the midst of an unprecedented recession, most new car buyers that take out loans will pay them off? You can't possibly have any. No recession in US history has been like this one, as far as I know, with respect to the credit markets, unemployment rate, government spending, and contraction of the economy. CARS has certainly increased the number of auto loans at a time when the future of the economy is uncertain. I really hope that most of those loans do get paid off, but I wouldn't be surprised if the final default rate is much higher than, say, 5 years ago. You can't pay off a loan if you lose your job, and the banks can't predict if you're going to lose your job.

Just some anecdotal evidence - I know a guy who traded in his clunker for a new Prius. He's a part-time independent consultant for my company, but is desperately looking for full-time employment. I don't know how he qualified for a loan, or what the heck he was thinking. Some people just can't pass up a "good" deal.

I'm not saying that CARS was a truly bad idea, but if the government's goal was to stimulate the economy in the long-term, then I can think of better ways to do it.

 

[rudder]

And on of the caveats of participating in cash for clunkers is you have to pay MSRP. So that $4500 rebate is not really $4500 since you paid a lot more than you would have normally paid for a car.

 

[GroundedSailor]

Originally posted by: dullard

Originally posted by: smashp
The profit goes to the stock holders

The profit (which at the moment is basically non-existant, so nothing is going to stock holders) is only a small percentage of the car price. Nothing prevents US citizens from holding stocks in foreign companies. And foreign entities hold a lot of US stocks. It isn't nearly as simple as your statement tries to make it.

It's not only the profit. There is a large amount of money that gets spent in R&D and creates jobs etc. I'd like to see where that is being spent. I would prefer to see that spent in US.

The other costly component is tool and die operations that go into making a car. Where does that money get spent? In the US, or are the dies imported into US auto factories? (edit) or should I say auto factories opened in the US?

 

[dullard]

Originally posted by: tk149
I'm not saying that CARS was a truly bad idea, but if the government's goal was to stimulate the economy in the long-term, then I can think of better ways to do it.

I'll try to be less sensitive - point taken.

I think the main goals were to:
1) Reduce foreign oil needs by increasing fuel economy. I think that worked. It was not a dramatic impact, but I can't see how this didn't help at least a bit.
2) Reduce pollution by getting old clunkers with bad fuel economy off the road. This is debatable if it worked large scale, but it certainly worked for some. For example, my parents used the program to get a van with no catalytic converter traded in for a new car.

Remember, this was first and foremost an environmental program - not a stimulus program. It just happened to be lumped into the stimulus package to get passed. This enviromental program has been successful in other countries and our green-minded politicians have been bouncing around the idea for quite some time.

Other goals:
3) Get unreliable, unsightly, and possibly unsafe cars off the road. Again, this probably worked in some cases, but certainly not all.
4) Get much needed short-term cash to automanufactuers without breaking international free trade agreements. Our government was treading that thin line precariously with the first insufficient bailout. They couldn't just plunk cash in their hands. But, they could indirectly give them cash in programs like this.

I don't think the goal ever was a long-term stimulation for the economy. It is a bit of a stretch to think a one time spending of $10 per person could even come close to being a long-term stimulation. Very few things the goverment can do will effect the economy long-term. There are some things though (build infrastructure or increase education/training). But those cost far, far more than $3B. Goal #4 was much more limited - to help dampen the wild car sale oscillations. Stimulate the short-term sales now, and hopefully dampen the wild swing back to the boom cycle that would have occured when the recession ended. I just personally think that the program couldn't go wrong on that idea. It might have been insufficient or too costly but at least it was an effort in the right direction. The result was not too bad considering it was one of the lesser program goals.

 

[desy]

1 taxing gasoline would do better, read up on Jevins paradox, more efficient just means people will consume the same or more
http://en.wikipedia.org/wiki/Jevons_paradox
2 see my previous points regarding pollution
http://www.nytimes.com/2009/08....html?_r=2&ref=opinion
3 many many cars were turned in before their usable life cycle
4 free market, the industry was overselling at 17 million a year because there are more registered cars than registered drivers and autos last a lot longer than they used to.

Demand was also high due to credit where that HELOC got you a new car and tv based on a artificially high value of homes.

Time will tell if the market for new cars collapses in the next few months without the program. I think it will, the industry as it was built on wants over needs and needed to shift

 

[dullard]

Originally posted by: desy
...

Finally someone with valid arguments. I won't try to sway you. I perfer to fight against the much easier fear-based or emotion based arguments.

Ford sales were up 17% in August it appears. Now time to see if that 17% short-term boost was enough to help Ford stay solvent. Although really, it is GM that is more troublesome and I haven't seen GM numbers yet.

 

[desy]

Gm and Chrysler are down
Got to Edmunds they have it at the bottom of the page
Basically due to all the plant shutdowns they didn't have the inventory needed

 

[TheSlamma]

TOP TRADE-INS

1. Ford Explorer four-wheel drive

2. Ford F-150 Pickup two-wheel drive

3. Jeep Grand Cherokee four-wheel drive

4. Ford Explorer two-wheel drive

5. Dodge Caravan/Grand Caravan two-wheel drive

6. Jeep Cherokee four-wheel drive

7. Chevrolet Blazer four-wheel drive

8. Chevrolet C1500 pickup two-wheel drive

9. Ford F-150 pickup four-wheel drive

10. Ford Windstar front-wheel drive van

w00t, crush these rags!

 

[piasabird]

I dont believe in purchasing new cars. It is a major waste of money. You just have to pay more for insurance and the loan to the bank. If you drive a new car off a lot, you lose $5,000.00.

 

[tk149]

Originally posted by: dullard

I'll try to be less sensitive - point taken.

I think the main goals were to:
1) Reduce foreign oil needs by increasing fuel economy. I think that worked. It was not a dramatic impact, but I can't see how this didn't help at least a bit.
2) Reduce pollution by getting old clunkers with bad fuel economy off the road. This is debatable if it worked large scale, but it certainly worked for some. For example, my parents used the program to get a van with no catalytic converter traded in for a new car.

Remember, this was first and foremost an environmental program - not a stimulus program. It just happened to be lumped into the stimulus package to get passed. This enviromental program has been successful in other countries and our green-minded politicians have been bouncing around the idea for quite some time.

Other goals:
3) Get unreliable, unsightly, and possibly unsafe cars off the road. Again, this probably worked in some cases, but certainly not all.
4) Get much needed short-term cash to automanufactuers without breaking international free trade agreements. Our government was treading that thin line precariously with the first insufficient bailout. They couldn't just plunk cash in their hands. But, they could indirectly give them cash in programs like this.

I don't think the goal ever was a long-term stimulation for the economy. It is a bit of a stretch to think a one time spending of $10 per person could even come close to being a long-term stimulation. Very few things the goverment can do will effect the economy long-term. There are some things though (build infrastructure or increase education/training). But those cost far, far more than $3B. Goal #4 was much more limited - to help dampen the wild car sale oscillations. Stimulate the short-term sales now, and hopefully dampen the wild swing back to the boom cycle that would have occured when the recession ended. I just personally think that the program couldn't go wrong on that idea. It might have been insufficient or too costly but at least it was an effort in the right direction. The result was not too bad considering it was one of the lesser program goals.

Admirable goals, but I'll disagree and say that this was a pork program, sold as a stimulus and environmental program. I've seen analyses that have demonstrated that the environmental impact of this program is really minimal. At this point, I'm so disillusioned that I'd be surprised if any Congressman even looked at these studies before passing the law.

I'd rather the government had spent $30 billion on infrastructure (which would affect long-term economic recovery) than $3 billion on this program. If government has to spend money, spend it on something truly useful and do it right.

 

[Engineer]

Originally posted by: piasabird
I dont believe in purchasing new cars. It is a major waste of money. You just have to pay more for insurance and the loan to the bank. If you drive a new car off a lot, you lose $5,000.00.

If nobody bought new cars, you would never have a decent supply of traded in "used" cars for purchasing, now would you?

 

[blackangst1]

Originally posted by: tk149

Originally posted by: dullard

I'll try to be less sensitive - point taken.

I think the main goals were to:
1) Reduce foreign oil needs by increasing fuel economy. I think that worked. It was not a dramatic impact, but I can't see how this didn't help at least a bit.
2) Reduce pollution by getting old clunkers with bad fuel economy off the road. This is debatable if it worked large scale, but it certainly worked for some. For example, my parents used the program to get a van with no catalytic converter traded in for a new car.

Remember, this was first and foremost an environmental program - not a stimulus program. It just happened to be lumped into the stimulus package to get passed. This enviromental program has been successful in other countries and our green-minded politicians have been bouncing around the idea for quite some time.

Other goals:
3) Get unreliable, unsightly, and possibly unsafe cars off the road. Again, this probably worked in some cases, but certainly not all.
4) Get much needed short-term cash to automanufactuers without breaking international free trade agreements. Our government was treading that thin line precariously with the first insufficient bailout. They couldn't just plunk cash in their hands. But, they could indirectly give them cash in programs like this.

I don't think the goal ever was a long-term stimulation for the economy. It is a bit of a stretch to think a one time spending of $10 per person could even come close to being a long-term stimulation. Very few things the goverment can do will effect the economy long-term. There are some things though (build infrastructure or increase education/training). But those cost far, far more than $3B. Goal #4 was much more limited - to help dampen the wild car sale oscillations. Stimulate the short-term sales now, and hopefully dampen the wild swing back to the boom cycle that would have occured when the recession ended. I just personally think that the program couldn't go wrong on that idea. It might have been insufficient or too costly but at least it was an effort in the right direction. The result was not too bad considering it was one of the lesser program goals.

Admirable goals, but I'll disagree and say that this was a pork program, sold as a stimulus and environmental program. I've seen analyses that have demonstrated that the environmental impact of this program is really minimal. At this point, I'm so disillusioned that I'd be surprised if any Congressman even looked at these studies before passing the law.

I'd rather the government had spent $30 billion on infrastructure (which would affect long-term economic recovery) than $3 billion on this program. If government has to spend money, spend it on something truly useful and do it right.

FUD. The government spent $3 billion and in return got over $15 billion back into circulation, with benefits spreading from the gov't to state gov't to finance companies to banks to credit unions to dealership owners to salespeople to grocery stores to truckers to scrap metal yards.

 

[dullard]

Originally posted by: piasabird
I dont believe in purchasing new cars. It is a major waste of money. You just have to pay more for insurance and the loan to the bank. If you drive a new car off a lot, you lose $5,000.00.

That is true in many cases, but not all cases. Don't fool yourself into buying only used as you might miss out on an even better option. The most extreme case was the Prius. For quite some time a used Prius sold for MORE than a new one due to lack of supply.

But there are many more common examples. My 2002 Honda Civic (bought new) has lost on average ~$1050 in value a year (I check yearly on KBB and NADA prices assuming mid-line condition for a private sale). Yes, even in the first year it lost only about $1000 in value. That works out to be $88/month. There are MANY used cars that require more than $88/month for repairs. Heck, buy a car near 100,000 miles and you'll be hit with a scheduled maintance bill of ~$1500 right off the bat for new tires, new belts, etc. My the insurance with full coverage has been roughly $50/month for the Civic. With costs that low, you really can't save much by going used. You may save a little tiny bit by going used when compared to a new car that retains value but you also may give up a whole lot.

Used might always be the right option for you, piasabird. But, please don't harm your finances by prematurely excluding new. At least do the math first with REAL numbers. Then pick the better option.

 

[GroundedSailor]

Originally posted by: dullard

Originally posted by: piasabird
I dont believe in purchasing new cars. It is a major waste of money. You just have to pay more for insurance and the loan to the bank. If you drive a new car off a lot, you lose $5,000.00.

That is true in many cases, but not all cases. Don't fool yourself into buying only used as you might miss out on an even better option. The most extreme case was the Prius. For quite some time a used Prius sold for MORE than a new one due to lack of supply.

But there are many more common examples. My 2002 Honda Civic (bought new) has lost on average ~$1050 in value a year (I check yearly on KBB and NADA prices assuming mid-line condition for a private sale). Yes, even in the first year it lost only about $1000 in value. That works out to be $88/month. There are MANY used cars that require more than $88/month for repairs. Heck, buy a car near 100,000 miles and you'll be hit with a scheduled maintance bill of ~$1500 right off the bat for new tires, new belts, etc. My the insurance with full coverage has been roughly $50/month for the Civic. With costs that low, you really can't save much by going used. You may save a little tiny bit by going used when compared to a new car that retains value but you also may give up a whole lot.

Used might always be the right option for you, piasabird. But, please don't harm your finances by prematurely excluding new. At least do the math first with REAL numbers. Then pick the better option.

When you get to high end models, the used numbers start looking much better.

Personal example, a few months ago I bought a 10 month old vehicle with 10,000 miles on it.

List price: $46K,
Best deal I could find for new vehicle: $40,200
I paid $26,700 for the used.

Runs like a champ & I couldn't be happier with the savings.

 

[b0mbrman]

Originally posted by: piasabird
I dont believe in purchasing new cars. It is a major waste of money. You just have to pay more for insurance and the loan to the bank. If you drive a new car off a lot, you lose $5,000.00.

My last four cars have been used, but I've always balanced new cars into the deliberations.

The peace of mind of a warranty plus discounts and the better rate for financing sometimes make it close.

 

[BlahBlahYouToo]

Originally posted by: Craig234
Just to highlight the point, the NUMMI plant, Toyota's only union plant in North America, mde the top seller, the Corolla - with award-winning quality and productivity.

The same plant that the anti-union ideologues are cheering to have closed, cheering the lowering of wages, worker protections and environmental protections.

It's funny how they'll say they want a clean environement, prosperity - but at the same time will cheer the actual measures that protect the environement and better wages.

ahhhh, that explains the lower quality of the corollas as of late.


no one is arguing the ability of union workers to do their job. after all, it's not hard to use an air gun to turn some bolts.
it's just that they have inflated salaries so high that they've bankrupt the big 3. they demanded full health care for life and job banks.

and as a counter example, look at all the other union plants that have been pumping out shitty cars for decades.

 

[spidey07]

Originally posted by: BlahBlahYouToo

Originally posted by: Craig234
Just to highlight the point, the NUMMI plant, Toyota's only union plant in North America, mde the top seller, the Corolla - with award-winning quality and productivity.

The same plant that the anti-union ideologues are cheering to have closed, cheering the lowering of wages, worker protections and environmental protections.

It's funny how they'll say they want a clean environement, prosperity - but at the same time will cheer the actual measures that protect the environement and better wages.

ahhhh, that explains the lower quality of the corollas as of late.


no one is arguing the ability of union workers to do their job. after all, it's not hard to use an air gun to turn some bolts.
it's just that they have inflated salaries so high that they've bankrupt the big 3. they demanded full health care for life and job banks.

and as a counter example, look at all the other union plants that have been pumping out shitty cars for decades.

non-union shops have the same pay and benefits for the most part. It's the market rate for their work. It's hard work and they get paid what they are worth.

 

[Strk]

Originally posted by: BlahBlahYouToo

Originally posted by: Craig234
Just to highlight the point, the NUMMI plant, Toyota's only union plant in North America, mde the top seller, the Corolla - with award-winning quality and productivity.

The same plant that the anti-union ideologues are cheering to have closed, cheering the lowering of wages, worker protections and environmental protections.

It's funny how they'll say they want a clean environement, prosperity - but at the same time will cheer the actual measures that protect the environement and better wages.

ahhhh, that explains the lower quality of the corollas as of late.


no one is arguing the ability of union workers to do their job. after all, it's not hard to use an air gun to turn some bolts.
it's just that they have inflated salaries so high that they've bankrupt the big 3. they demanded full health care for life and job banks.

and as a counter example, look at all the other union plants that have been pumping out shitty cars for decades.

You realize the only non-union auto factories are foreign-owned factories in the US, right? In other words, of the hundreds of factories out there, only the dozen (it may be one or two higher) in the US aren't union.

 

[Ktulu]

Originally posted by: desy
Gm and Chrysler are down
Got to Edmunds they have it at the bottom of the page
Basically due to all the plant shutdowns they didn't have the inventory needed

GM has also been cutting back big on fleet sales over the past year.

 

[Praxis1452]

I can't believe people think this type of thing works. I think john stossel the 20/20 news anchor sums it up pretty well.

http://blogs.abcnews.com/johns...cash-for-clunkers.html

and

http://blogs.abcnews.com/johns...-clunkers-is-dead.html



"President Obama declared the program "successful beyond anybody's imagination." Yes, who could have imagined that free money would have been so popular?

Given the program's success, you would expect the administration to push for additional billions in funding, just as they did when the first billion was snatched up. But no.

The federal government, acknowledging that the "Cash for Clunkers" program was running out of money, declared it a success Thursday and killed it off, effective 8 p.m. Monday.

If it was so successful, why kill the program? Is it possible that they have come to understand the economic principles of the broken windows fallacy and appreciate the unintended consequences of giving people free money to destroy still useable cars? Judging from the White House?s response to news that charities were suffering from the Cash for Clunkers program, I?d say the answer is no:

The National Kidney Foundation ? says [it] gets about 19% of its annual revenue from selling donated cars. The charity said it estimates a 10% to 15% decline because of the federal rebates ... White House spokeswoman Jen Psaki says the program ... will have a ?negligible? effect on charities. Psaki says the Car Allowance Rebate System (CARS) was created to provide a ?timely, temporary and targeted? economic stimulus and was not intended to divert vehicles from charities.

Economist Russ Roberts summarized this nonsense well:

What she seems to be saying is that because CARS wasn?t intended to affect charities, the effect has to be negligible. So unintended consequences don?t exist. Beautiful.

Given the White House?s clueless comment, I?d say we have more educating to do. I am glad the government is ending this misguided program, but I would like to hear an explanation for why this giveaway was a success at $1 Billion and at $3 Billion, but somehow won't be the same "success" at anything more than that. The answer is likely that, at some point, the unintended consequences of the program become too obvious for anyone to ignore."

 

[Acanthus]

Originally posted by: spidey07

Originally posted by: b0mbrman
For what it's worth, six of the top ten vehicles were made in the U.S. and a seventh was made somewhere else in North America.

That doesn't matter. The profit/money is still leaving the country. Buy American.

So how many of these companies are not American?

Primary Institutional Shareholders of Toyota Motors Corp. (TM)

Fidelity Management & Research 577.38 M

AllianceBernstein L.P. 285.12 M

Delaware Investments 134.11 M

Neuberger Berman, LLC 107.63 M

Institutional Capital, LLC 52.16 M

Brandes Investment Partners, LP 48.18 M

Thornburg Investment Management, Inc. 47.95 M

Templeton Investment Counsel, LLC 46.57 M

McLean Budden Ltd. 46.47 M

Brandywine Global Investment Management, LLC 33.29 M

Mutual Fund Holders of Toyota Motors Corp. (TM)

Fidelity Diversified International Fund 407.86 M

Fidelity Overseas Fund 85.11 M

Franklin Templeton VIPT Templeton Foreign Sec. 28.73 M

Vanguard U.S. Growth Fund 22.84 M

MainStay ICAP International Fund 21.46 M

Neuberger Berman Socially Responsive Fund 19.40 M

DFA International Core Equity Portfolio 19.05 M

Neuberger Berman Guardian Fund 19.01 M

AllianceBernstein Pooling Portfolio - U.S. Large Cap Growth 18.35 M

AllianceBernstein Global Thematic Growth Fund, Inc. 17.64 M

 

[Craig234]

Originally posted by: Praxis1452
I can't believe people think this type of thing works. I think john stossel the 20/20 news anchor sums it up pretty well.

John Stossel is a right-wing propagandist, mostly. Of course he'll look for an angle to attack Obama. He's lost the right to be listened to for me, too many lies.

 

[Craig234]

Originally posted by: spidey07

Originally posted by: BlahBlahYouToo

Originally posted by: Craig234
Just to highlight the point, the NUMMI plant, Toyota's only union plant in North America, mde the top seller, the Corolla - with award-winning quality and productivity.

The same plant that the anti-union ideologues are cheering to have closed, cheering the lowering of wages, worker protections and environmental protections.

It's funny how they'll say they want a clean environement, prosperity - but at the same time will cheer the actual measures that protect the environement and better wages.

ahhhh, that explains the lower quality of the corollas as of late.


no one is arguing the ability of union workers to do their job. after all, it's not hard to use an air gun to turn some bolts.
it's just that they have inflated salaries so high that they've bankrupt the big 3. they demanded full health care for life and job banks.

and as a counter example, look at all the other union plants that have been pumping out shitty cars for decades.

non-union shops have the same pay and benefits for the most part. It's the market rate for their work. It's hard work and they get paid what they are worth.

First of all, it has nothing to do with 'what they're worth', other than that setting some ceiling on their possible pay based on the revenue.

Second, that's not accurate, although in some cases non-union shops have come closer to union compensation. There might be exceptions I am not familiar with, but the general rule is that union wages used to pull non-union wages up, and more recently non-union shops have been pulling union wages down.

In many cases wages have both are a fraction of what auto makers used to make, some apparently in the mid-teens per hour.

I'd tend to agree that there have been some excesses for unions in the past, lifetime medical is a bit much - though UHC would fix that - and it puts the US companies at a competitive disadvantage to foreign who don't have any legacy retirees to pay for medical care and pensions.

Thoughtless people on the right seem to cheer the foreign companies for not having those expenses, as if they are against workers getting better benefits.

Even if there have been union excesses, that doesn't mean they aren't the better situation for workers and the nation.

I do also have to agree though that while I defended NUMMI productivity, at other US union plants, the productivity has sometimes suffered compared to foreign makers.

The reason GM agreed to the NUMMI deal was that after they had to close the plant as a GM-only union plant with low productivity, by joining with Toyota, it let them learn how to improve productivity from techniqes Toyota had developed in Japan. GM then spread what they learned to other plants.

 

[Acanthus]

So Fidelity is the primary institutional shareholder of Toyota, with over $1B in shares.

Headquarters: 601 Riverside Avenue
Jacksonville, FL 32204

Hrm.