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Old 08-07-2009, 09:27 AM   #1
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Cash for Clunkers


I've been thinking of the economics of the Cash for Clunkers (CFC) incentive program. I am wondering who is actually getting the money.
I know it's intended that the buyer gets the incentive but I'm not convinced. I think that the dealerships are getting the majority of the incentive. My reasoning is that the prices look attractive especially with additional manufacturer incentives but are there any negotiations… or is the formula --- $List price - $manufacturer incentives - $Government CFC = $Final Price?
When I bought a car last year I was able to negotiate well below list price and invoice. Is that still the case or are dealers pushing the fact of how much you’re saving with the incentive programs and not negotiating?
Has anyone taken advantage of this program? What was your experience? Was there any haggling?
I have the same thoughts for the new home buyer incentives. Who’s getting the benefit? The owner (by raising the price) or buyer?
In any case, I guess it's beneficial to the economy but I think people are being fooled.
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Old 08-07-2009, 10:03 AM   #2
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Cash for Clunkers


Ok...I'll start by saying while I don't agree with the program on a policy level, I did take advantage of the C4C.

My experience purchasing a 2009 Chevy Silverado 1500. The dollars break out like this:
- $2500 from Invoice
- $4000 from GM (government motors),
- $4500 from C4C,
- $500 for affiliated membership discount,
- $1000 for "old inventory" (ask for more info if your interested, not all dealers pass this on to the customer.)
Should be a discount amount = $12,500 from invoice. At this rate there wasn't much haggling....I did get them to drop some $ on there in house stuff like bed liner and under-coating/rust proofing.

This 2009 truck cost me less than what I paid for my like outfitted 1994 GMC in 1994. It has 243K miles on it with a $3+K in needed repairs and fixes, that I was waiting to see what happened with the C4C program.

To answer the question the money goes directly to the dealership, I'll never see the green backs...but I don't really care. My truck was in the process of being replaced in the near future...and the stars were aligned I guess.

One of the biggest problems I see is that the used car market will really suck for the next few years....and MANY people rely upon them.

I think it's sad that we're supporting foreign car markets with the program....

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Old 08-07-2009, 10:06 AM   #3
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Cash for Clunkers


In order to receive federal reimbursement for the subsidy consumers get for trading in their cars, dealers must first destroy the engine. One common method is to drain the car's oil and flood the engine with sodium silicate, or liquid glass. Dealers then turn the car on and rev the engine to let the solution harden. In just a few minutes, the car becomes inoperable.

It is also estimated that there have been 240,000 vehicles traded already. Those 240,000 are out of the market for retail sale, so they are being scrapped. What will that do to scrap metal values? Flood the market with salvaged metals and drive prices down? What about the auto salvage market? A big portion of the retail value of an obsolete or junked car is in salvaged driveline parts. A large number of the cars traded would normally be exported (beleive it or not). Those cars are no longer available, so another exportable commodity is gone. There will also be fewer used cars available for retail to a segment of the market that will never be able to afford a new car even with the incentives. With fewer cars available, the used car price will likely jump. That could be good or bad depending on which side of the sales counter you're standing on. Seems like the auto industry will benefit at the expense of other tertiary industries. On top of all of that, you and I are paying the $3500-$4500 courtousy of our generous friends in Washington.
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Old 08-07-2009, 10:19 AM   #4
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The consumer gets a credit, the dealership/manufacturer get the money at the taxpayers expense.

The C4C should only remove the vehicle which are less than 25 years old and got an EPA estimate of less than 18 MPG.

Bad deal, I can't wait for the health care......
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Old 08-07-2009, 10:32 AM   #5
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Cash for Clunkers


Health care is a different topic altogether. I'm fully on board with this one. I have a self-employed friend and has a healthy family of 3. Cost for health insurance $18000/yr.
Most employees don't realize how much your employers are paying for the benefit.
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Old 08-07-2009, 10:33 AM   #6
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Quote:
Originally Posted by Maintenance 6 View Post
It is also estimated that there have been 240,000 vehicles traded already. Those 240,000 are out of the market for retail sale, so they are being scrapped. What will that do to scrap metal values? Flood the market with salvaged metals and drive prices down? What about the auto salvage market? A big portion of the retail value of an obsolete or junked car is in salvaged driveline parts. A large number of the cars traded would normally be exported (beleive it or not). Those cars are no longer available, so another exportable commodity is gone. There will also be fewer used cars available for retail to a segment of the market that will never be able to afford a new car even with the incentives. With fewer cars available, the used car price will likely jump. That could be good or bad depending on which side of the sales counter you're standing on. Seems like the auto industry will benefit at the expense of other tertiary industries. On top of all of that, you and I are paying the $3500-$4500 courtousy of our generous friends in Washington.
These downstream economic effects will be case studies for years to come.
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Old 08-07-2009, 10:44 AM   #7
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Charities have already reported a large decrease in donated cars

I also thought the cars could be parted out, not just melted down as scrap
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Old 08-07-2009, 10:49 AM   #8
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My reasoning, this is a stop gap measure and will not stimulate the economy. What is going to happen when this program ends? Are Americans going to continue to purchase cars at this artifically accelerated rate?

We will be right back where we are now, except the tax payers are out another 3 billion.

BTW, I'm self employeed, know what exactly it costs to get private coverage and do not consider government heath care a viable alternative.
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Old 08-07-2009, 10:55 AM   #9
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They can sell parts off the car 1st:

http://www.cars.gov/faq#category-14

Quote:
The entity crushing or shredding the vehicles in this manner will be allowed to sell some parts of the vehicle prior to crushing or shredding it, but these parts cannot include the engine or the drive train.
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Old 08-07-2009, 02:42 PM   #10
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Originally Posted by Scuba_Dave View Post
They can sell parts off the car 1st:

http://www.cars.gov/faq#category-14
Driveline parts are where auto salvagers make thier money. There isn't much call for side mirrors and radios.
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Old 08-07-2009, 03:37 PM   #11
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I saw a junk dealer interviewed last night. They used to make as much as 3/5k per junk car.
With the motors trashed all they have now is a pile of scrap metal, so 3/5 hundred now.
With the top 4/5 cars traded in being the same make, but differant years, no need to keep body parts aroound to sell.
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Old 08-07-2009, 03:37 PM   #12
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Quote:
Originally Posted by Maintenance 6 View Post
It is also estimated that there have been 240,000 vehicles traded already. Those 240,000 are out of the market for retail sale, so they are being scrapped. What will that do to scrap metal values? Flood the market with salvaged metals and drive prices down? What about the auto salvage market? A big portion of the retail value of an obsolete or junked car is in salvaged driveline parts. A large number of the cars traded would normally be exported (beleive it or not). Those cars are no longer available, so another exportable commodity is gone. There will also be fewer used cars available for retail to a segment of the market that will never be able to afford a new car even with the incentives. With fewer cars available, the used car price will likely jump. That could be good or bad depending on which side of the sales counter you're standing on. Seems like the auto industry will benefit at the expense of other tertiary industries. On top of all of that, you and I are paying the $3500-$4500 courtousy of our generous friends in Washington.
You hit it right on the head! All the "junkers" that are normally sold at auction to developing countries are now being destroyed... So you screw the poor foreigners and keep them living in the stoneage

Most people would have a new car if they could afford it. They rely on scrap parts from these older cars, now there will be a huge buracracy to get these parts off the cars.

The people who trade in there big expensive SUVs and other gas guzzlers are the ones who don't need any assistance in the first place. Rarely do I see a vehicle that qualifies for this credit on the road.

All in the name of some bulls**t "green" fallacy. wake up people it's just agenda not science! It's a SCAMMMMM

I wonder if the big healthcare reform will go any better than this mess.

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