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Was Cash for Clunkers a Wise Investment or a Mistake?
by: Nicole Melissa

The Cash for Clunkers program began winding down at the end of last week, with several nearby dealerships ended their participation in the program due to the government’s reports to end funding on Monday, August 24th.

Some dealerships decided to stop doing deals early because they had done so many deals that they did not want the government to run out of funds and be unable to reimburse them. Cash for Clunkers was exceedingly popular, with $3 billion in federal government funds going through dealerships as rebates for citizens to cash in their old gas-guzzling cars and upgrade to newer more fuel-efficient vehicles.

Many people who did have old gas-guzzlers got very excited as soon as they heard about the Cash for Clunkers program, an opportunity for them to save $3,500 to $4,500 off the price of a new car. For people who were already thinking about upgrading and trading in their old vehicle or buying a new car, this program was a happily welcomed mode of assistance. It surely prompted people who were not considering upgrading their vehicle to think more seriously about it, as the financial incentive was strong.

Different people have differing opinions about the government’s wisdom in implementing this program. More fuel-efficient vehicles on the road will certainly help the environment. The troubled auto industry benefitted, at least in the short run, by this program, although critics say that this may hurt them in the long-run with an immediate drop-off in their sales, especially since they were expecting the program to run until either November or September and may have increased production to satisfy this demand.

One economic critic compared this fuse of income to the auto industry to a shot of heroine, something that would stimulate a person’s energy in the short run but definitely not improve their long-term health. Time will tell whether this is true or not.

And while people who bought a new car are certainly delighting in their new purchases, some lament that everyone’s tax money (10 dollars each, with $3 billion spent and approximately 300 million people living in the United States) went to buying people new cars—especially in rare instances where people traded in an old hunting truck or rarely used vehicle for a new car to take advantage of the rebate because they couldn’t turn this opportunity down.

Because the environment is such a crucial issue, and everyone likes new cars, I say $10 of my money is worth the possibility that our environment and people’s spirits will be improved—and we won’t have to look at as many ugly old cars on the road. My parents are the proud owners of a new car thanks to Cash for Clunkers, and as I enjoy our new family vehicle, I am happy to have helped them out. Your opinions are appreciated as well.

What do you think? Leave your comment here.

Comment by Jon 9/1/2009 4:06:00 PM

Only people with good jobs could take advantage of the clunker deal. Large late-model SUV and trucks (still perfectly good-they had to be for the rebate rules) dominated this rebate. Poorer people still have to drive clunkers. The way the milage rule was written, you could trade-in for a Hummer, or something else with poor milage, if it got 4 MPG more than the trade-in. I would adjust the rules to allow for trading in for used cars, and set the lowest milage car acceptable for buying to 25-30 MPG. Then more gas guzzlers would be off the road, and average milage of the U.S. populace would increase. Resulting in further stimulation of the economy.

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