Cash For Clunkers Ends Monday: Here’s Why I’m Keeping My Clunker

by Millionaire Mommy Next Door on August 20, 2009

in Economy

Quick and sloppy post here — I have timely news and advice but only 10 minutes to share…

The Cash for Clunkers program ends on Monday, but I won’t be spending my weekend tramping through car dealerships. Here’s why:

  • My clunker is worth more $ now because so many cheap cars have been destroyed. I won’t have any trouble selling it for a nice price, by owner, later.
  • It’s no deal to buy a brand new car … then pay for the instant depreciation that occurs as soon as you drive it off the parking lot. For the best deal, I buy my cars when they’re 1-2 years used, still under warranty, after the original owner has paid for the initial depreciation hit.
  • Yes, it’s a gas guzzler, but we drive only 10,000 miles annually. It would take a loooong time to hit the breakeven point between the gas savings and the extra expenses associated with buying a new car: purchase price, increased registration fees, higher insurance premiums, etc.
  • Like everything else we own, we have taken excellent care of our clunker. It’s clean, reliable, comfortable and still looks great. Frankly, I couldn’t bear to think of it being destroyed!
  • Once the Cash for Clunkers program is over, new car prices will likely come down for other reasons — namely, lack of buyers. Therefore, I’m not worried about missing out on a “good thing”. New car prices going DOWN due to lack of buyers AND used car prices going UP due to lack of cheap cars = A BETTER DEAL LATER.

My advice? Evaluate your finances and transportation needs carefully. If you were planning to buy a new car regardless of the program (and the expense), fine, go for it. But if you have a good ‘ol clunker like mine, avoid rash decisions.

{ 13 comments… read them below or add one }

Susan August 20, 2009 at 8:31 pm

We were hoping and praying that our 96 ford explorer with 235,000 miles would last until the cash for clunkers program started. Luckily, it did but the fan went out 2 weeks beforehand – so no a/c and there was always the possibility that the engine would overheat and die. Thank heavens for this cold summer. So yes, we were planning on buying a new car anyways.

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Ernest August 20, 2009 at 11:01 pm

Our 1999 Plymouth Voyager was totaled out in a hailstorm in 2004, and the insurance paid it off. Being dented all over but mechanically still fine, we drove it to 137,000 miles (for free) until it began costing a lot in repairs. So we had ordered a new 2010 Toyota Prius stripped for $22K, since the used ones cost around $19K even 3 years old (they hold their value well). When Cash for Clunkers came along before we took possession, it was a windfall. We were probably among the few that hit it just right – plus we write off state taxes this year (stimulus). -$6K total.

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chris August 21, 2009 at 6:27 am

We have a similar program in Germany. The combination of Ernest’s mail (hailstorm, insurance paid for car value) and Jen’s reasons made us step back and wait till we really need a new one.

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myownplace August 21, 2009 at 6:46 am

Our 1998 Ford Explorer is still in great shape with only 62K miles, we won’t be trading it in either.

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Samantha August 21, 2009 at 6:52 am

I tend to agree with you about the Cash for Clunkers program. I currently have a car payment and wish that I didn’t. I just can’t wrap my mind around why someone with a good running car and no payment would want to buy a new car and be saddled with payments for 3-5 years, and in some cases six years.

I had a hard time when I had to buy a car because my old one (a 12 year old car that I drove for 5 years) died on me. The thought of having a payment was horrible. But I made the plundge but wish that I hadn’t every month when I write out the check of the payment.

I am about to get on an excelerated plan to pay off my car so I can finally be car payment free, yipeeee!

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Sandy E. August 21, 2009 at 9:50 am

I’m not emotionally attached to my older, paid for, well-maintained car, but agree with you on all of your other points. If the cash for clunkers program let us buy used cars, 1-2 years old, I would have jumped on the deal, and even then would have paid cash. Just as there were people who were given subprime loans that they couldn’t afford or understand, I believe there are people who have participated in this program too who took out loans and won’t be able to keep up with payments and maintenance issues, new tires, etc. over time. Unlike foreclosures though, it’s real easy for car dealerships to repossess cars. It is a clear win for them. (btw, make sure your auto. insurance co. knows that you drive under 10,000 miles annually. I do too and mine gives me a reduction in my premiums because of that).

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Ann August 23, 2009 at 10:38 am

Besides the reasons already given for not participating in this program, here are a few more:

1. It is incredibly wasteful of resources. Yes, a newer more efficient car may use less oil going forward and produce fewer emissions, but the energy savings will not make up for resources being wasted by destroying a still-useful car. Everything in that car had to be mined or manufactured, shipped, assembled, transported, etc. Factories had to be lighted and heated or cooled, workers had to commute to factories, etc., to build that car. And it’s basically all being thrown away while still useful (using further resources in the disposal). Wasted. This is the opposite of frugal and ecologically sound.

2. I don’t blame people for taking money when it is thrown at them, but could we remember that this money was forcibly taken away from the people to whom it belonged, the taxpayers, on the rationale that it was to be used for the public and common good? Is it a “public and common good” to invent fanciful reasons to give away the public treasury to selected, favored individuals this way, especially when we are running an unprecedented budget deficit? (Or to selected, favored unions and corporations, since the true beneficiaries of this program are mostly not the people who throw away usable paid-for cars and go into debt to buy new ones, but the car manufacturers and the UAW. As Jenn points out, the $4,500 “gift” evaporates in depreciation when you drive the car off the lot.)

3. On top of the wasted resources and misdirected public money, we get to watch another instance of the federal government being unable to administer its way out of a paper bag. Total “clunkers” exchanged so far, about 400,000, with the car dealers advancing the $4,500. Total money distributed to dealers so far to reimburse them, about 2%, with many dealers struggling and bailing early on the program because it is taking so long to be rembursed. Total federal workers hired to administer this, 1,000. According to the federal office administering this, 85% of the paperwork from the dealers is “wrong” and has to be sent back. When experienced business people who constantly fill out forms for lenders, insurance companies, and other government offices make that many mistakes, is it really their fault or are the forms badly designed? Two or three years from now, the litigation this mess is spawning will still be working its way through the federal courts. It’s embarrassing to watch the whole thing.

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Ernest August 23, 2009 at 11:40 am

I agree with Ann, even though I benefited from this folly. I’m not sure when “conservationists” and “environmentalists” parted ways, particularly in logic. However, destroying a working vehicle should not make anyone feel good about saving the planet, even one driving a Prius like me. Plus, an unintended (I hope) consequence is that many poor families are going to have less option for something affordable to get to work, or even junkyard parts to maintain their much-needed clunker. This is simply another way to attempt to “spend our way out of debt.” If we don’t know where that idea will ultimately lead, we wouldn’t be reading this site, now would we?

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Chad @ Sentient Money August 25, 2009 at 9:19 am

Ann we actually agree on this.

Anyone who thinks this was an evironmentally designed program is just fooling themselves. Sure, environmentalism added a little to the law, but it was just window dressing. This was just more subsidies for the auto industry.

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Lakeisha August 28, 2009 at 9:41 am

I agree with you! I brought a new SUV a year ago and boy do I wish I waited. I am working very hard to get this paid off!

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Beth L. Gainer August 29, 2009 at 2:14 pm

Great point about buying used cars rather than a new car that depreciates quickly. Also, leasing cars is a waste of money. I learned that the hard way….

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Steph September 2, 2009 at 4:36 pm

Was the impact on the environment and what ever improvement to the economy worth the wastefulness of it all? I have to wonder if it wouldn’t have been better to just let those clunkers run until they couldn’t run any more. Eventually they would be off the road but if a person chose to continue to pour repair and gas money into it that’s thier choice. It seems to me there were better ways the money could have been spent or better yet, not spent at all. While I would have taken advantage of the program if I was in the position (my chevy has 175,000 miles and gets 29 mpg), it seems unfair to award those who have been driving those gas guzzlers.

And then there is the road work. There are 100s of roads that desparately need attention but they tore up highways that had plenty of useful life left to give people jobs. That’s what the $2000 signs say, anyway.

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Chad @ Sentient Money September 3, 2009 at 5:19 am

No matter how the program was actually marketed, it was never a program to directly benefit the people or the environment. It was designed to be a subsidy for the auto companies. By putting it in this form there was less outrage. It increased sales and reduced the number of used cars that can now be resold.

It will be interesting to see how far sales fall now that this program is over. I would think rather substantially.

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