Are You in Debt, Hurt by the Economy, or Have You Lost Your Job? Good, Then Buy a New Car and Crush Your Old One.

Saturday, January 31, 2009
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I don’t know who “Washington” is (is that a person?), but Washington wants you to buy a car. This is a most unbelievable attempt at socializing the industry even further by subsidizing specific purchases, enriching chosen recipients, and manipulating market pricing to prop up an industry that is entirely unsustainable in its present state.

Several ideas are on the table, but two of them are really making the industry pay attention. One plan is to make new car costs tax deductible. The other is to give rebates to Americans with old cars so they can better afford to buy new ones, a program otherwise known as “cash for clunkers.”

It gets worse. People in the government actually believe that they can manipulate the market pricing for used cars by …… crushing them. The “cash for clunkers” subsidy (called “fleet modernization”) means:

Owners of older cars would get vouchers worth thousands of dollars toward the purchase of newer, more fuel-efficient vehicle. For the customer to get that cash, the car dealer would have to certify that the trade-in was getting scrapped and not resold. The car’s vehicle identification number (VIN) would be tracked to make sure it never shows up on a vehicle registration again.

Crushing the old car has two benefits. First, it ensures that the consumer’s purchase of a more efficient vehicle actually has a net environmental benefit. Second, it prevents a glut of used cars on the market, which would reduce trade-in values for new car buyers, which would cut into the sales incentive effect.

I betcha couldn’t have guessed that the auto companies and the National Association of Automobile Dealers are lobbying for all of this…

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