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Cash For Clunkers Debacle (10 Years Old)

Discussion in 'Off Topic & Everything Else' started by Alexander Lau, Mar 25, 2019.

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  1. Alexander Lau

    Alexander Lau
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    Cash for Clunkers: Yet Another Way the U.S. Government Increased the Cost of Living
    https://mises.org/wire/cash-clunkers-yet-another-way-government-increased-cost-living

    Obama’s Car Allowance Rebate System (CARS), more popularly known as “Cash for Clunkers,” is now a decade old. Not surprisingly, this interventionist program was a massive policy failure for several very predictable reasons.

    The Cash for Clunkers program destroyed valuable resources, misallocated other resources, and made life difficult for cash-strapped drivers needing a low-priced car—not to mention mechanics and salvage yard operators who rely on clunkers for their livelihood. It, did nothing to rejuvenate the new car manufacturing industry. Before the next round of intervention we would be wise to reflect on Bastiat and learn the harsh lesson of Cash for Clunkers.
     
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  3. Alex Snyder

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    :bs: on so many levels.

    Economic collapse and resuscitations are never the act of a single measure or person. The economy is a complex beast. Progressives like to champion Roosevelt's New Deal as the reason we got out of the Great Depression. But it was a combination of that along with the fact that Europe was no longer an economic competitor (should we thank Hitler too?) due to WWII firing up. And we didn't get off our asses until Japan attacked.

    Do we claim Bush pulled us out of the economic downturn following 9/11 for helping to push 0% financing along with a massive increase in military spending?

    Were derivatives and predatory lending the sole reasons our last recession occurred? What about the massive increase in credit card debt, lack of savings, and devaluation of the dollar? Those aren't as fun for the media to cover.

    Cash for Clunkers absolutely put money in my pocket. It sure as shit has not had a damn thing to do with how long people keep cars today. I point that finger at the Federal Reserve continuing to keep a ridiculously low borrowing rate on the nation. That was a borrowing rate set in 2002. My suspicion is that they don't want to be the catalyst for the next recession as quantitative easing proves to have deflated the dollar a disgusting amount more.

    People are keeping cars longer because it is cheaper to finance more car at 84 months than to lease for 36 months. Americans no longer care about debt.

    None of this has anything to do with Obama, Bush, Hitler, or even Trump. These things are bigger than them.
     
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  4. Alexander Lau

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    Shit, predatory lending (Fannie and Freddie) was a major part of the last major economic recession and the majority of that took place during the Clinton era. $250K mortgages given to McDonald's workers. Huge credit card debt is due to the stupidity of a specific consumer (could be argued predatory, I suppose). Hell, do we want to talk about student loans? Hey, I can respect your viewpoint and agree that the economy is dynamic (presidents don't truly control much of that) and many forces are at play. You might have made money, but I know plenty that didn't.

    He does account for the upturn.
    "Also contributing to the post-recession increase in auto sales was an increase in the number of households over that same period of time. While the number of autos per U.S. household actually trended down slightly from 2.05 autos per household in 2008 to roughly 1.95 in 2018, the number of total households increased over that same period — and at a significantly greater rate than the number of vehicles per household went down, accounting for more total cars in use. Demographics and consumer preferences, not Cash for Clunkers, created the post-recession spike in new car sales."
     
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  5. Alex Snyder

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    You know of many people who didn't make money directly because of Cash for Clunkers? :thinker:
     
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  6. Alexander Lau

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    I'm referring to the program itself. There was nothing that led them back to or proved that program made money for them. Better phrased?

    https://www.politico.com/story/2013...ack-obama-administration-cars-stimulus-099134

    https://www.foxnews.com/politics/study-cash-for-clunkers-an-even-bigger-lemon-than-thought
    "Strikingly, we find that Cash for Clunkers actually reduced overall spending on new vehicles," the researchers reported, noting households "tended to purchase less expensive and smaller vehicles such as the Toyota Corolla, which was the most popular new vehicle purchased under the program."

    They found buyers who participated "spent an average of $4,600 less on a new vehicle than they otherwise would have."

    During the two months of the program, the frequency of purchasing a new vehicle was around 50 percent higher for those who qualified for the program compared with those who did not. But after the program ended, the researchers found, car-buying habits returned to normal.

    Cash for Corollas: When Stimulus Reduces Spending
    https://www.nber.org/papers/w20349
     
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    #5 Alexander Lau, Mar 25, 2019
    Last edited: Mar 25, 2019
  7. Alex Snyder

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    EDIT - you added other links to your post since I made this one. So now I have to edit this. Edits in red.

    Yes, that is better.

    If there were dealers who didn't benefit, I would argue the fault is their own here. Cash for Clunkers not only helped us, at Checkered Flag, generate sales at a time when outlooks were dire. We had laid-off over half our employees, cut tons of vendors, and still weren't seeing the sun on the horizon. It was one of the most profound periods of my life. The day I forget the lessons learned from that time is the day I do not deserve to earn another dollar.

    With Cash for Clunkers, we tried something different: we enticed people with our website. I got with Rick Gibbs, Lee Allen, Chris Scott, and Brian Valentine at Dealer.com to devise a way to lower our vehicle prices by the size of the Cash for Clunkers rebate along with the MPG rating to help people understand it more. In a hurry, we threw together a simple CSV file that showed the discount and MPG stats by stock number. Dealer.com applied some special code to match it to our inventory feed.

    Within two days our Hyundai showroom was overflowing in customers. Then the VW store, then Toyota, then Honda, etc. We almost filled our Toyota store's (built to handle over 400 sales per month) parking lot with clunkers in less than 40 days. And a handful of us were up at 3 in the morning trying to get Cash for Clunkers rebates filled by the government after California was giving up on that piece of crap system.

    Cash for Clunkers taught us that the dealership website does sell cars. It helped us sell out of Cash for Clunker-approved models long before our competitors. It gave a lot of us a sorely missed commission check again. It was the stimulus we needed at Checkered Flag who has been growing ever since.... even 10 years later.
     
    #6 Alex Snyder, Mar 25, 2019
    Last edited: Mar 25, 2019
  8. Alexander Lau

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    Sh*t, that's smart! Then you guys used the program to your benefit, but not all dealers are that slick, let's be honest about it. I'd be interested in hearing more success stories from others, if that's the case.

    It's been my experience that it didn't work out very well for a number of dealers that I know. I received that hyperlink from a dealer contact, actually.
     
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  9. Alexander Lau

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  10. Ralph Ebersole

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    I t
    I think it also means 6 of ten wanted it extended. And that's without the Electoral College count.The second article was referring to the website and having to wait for their money.

    This program brought out buyers who would never have been in the market at that time. I personally sent 3 to their local dealers. None of them were thinking about buying a new cars and all 3 did. Fact is the .com I worked for at the time really highlighted the program and it sent buyers to stores. I know very few dealers that called it a failure (like zero). It was found business.

    While buyers may have reverted back to their normal buying habits, it did work. Any dealer who was disappointed with it should look in the mirror.
     
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  11. Alexander Lau

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    I get it, it's a poll (and probably grossly underrepresented and flawed), but we can't assume that the 6 of 10 wanted it extended, that's not what the data suggested.

    It is interesting to hear the two of you in favor of it though. I'm quite surprised as that's not what I've heard out of my client base. I wonder why all of the negative content on it out there? Do either of you have a hunch? It can't just be anti-Obama rhetoric.
     
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