August 12, 2009

Cash for Clunkers update

Since I wrote this post detailing my concerns about the "Cash for Clunkers" program, a lot has happened. It was so successful in terms of participation that the money ran out and 2 billion dollars more has been approved. All kinds of articles have been written giving the program the thumbs up or thumbs down, but I haven't seen many that address the specific issue of what happens to all the cars that get scrapped.

This article does mention that it might not be a great idea to scrap cars with less than 10,000 miles on them. And it claims that by junking all those "clunkers" the used car market will dry up and it will be more expensive to buy a used car. My husband and I have bought a lot of used cars over the years, and we've learned a lot in the process. I plan on writing a post on "How To Buy a Used Car" very soon that will help the people who couldn't afford to buy a new car, even with the $4500 voucher. The possibility of driving up used car prices is also discussed in this article, along with some other possible downsides like drivers using more gas and declining sales of other goods.

I've been surprised to find so little about the environmental impact of the program. Most of what has been written focuses on the positive impact of people buying new fuel-efficient cars such as the Prius. And I agree it is definitely a net positive to get gas-guzzlers off the road and more people driving cars that get better gas mileage. But back to the other part of the equation: trashing the clunkers. What are the environmental costs involved in that, and how will it be overseen?

Finally, this article rates the program as weak in terms of its effect on curbing pollution. Apparently the effect on global warming will be a "blip" and climate experts say it's not an effective way to address the issue. But on the upside, the program will get the dirtiest cars off the road for good. And I was happy to learn what happens to the cars that are turned in: their engines are destroyed by being "immobilized with liquid gas" and the rest of the parts can be recycled and used as scrap.

The director of the Center for Climate Change Law at Columbia University put it this way: "It's not that it's a bad idea: just don't sell it as a cost-effective energy savings method. From an economic standpoint, it seems to be a roaring success. From an environment and energy perspective, it's not where you would put your first dollar." That sounds to me like a plus for the economy, and a neutral for the environment. Like most things in life, a mixed bag. I guess it could be worse. The economy came first, but at least it wasn't exactly at the expense of the environment, as so often happens.

What do you think? Does the economy have to take precedence over the environment right now, or is it another instance of short-term thinking? Have you taken advantage of the program? Please leave your responses in the Comments section.


Leigh @ compactbydesign said...

We have considered taking advantage of the program but just aren't in a position to buy right now, used or new.

That being said, I'm mixed in my approval of this program. I do think it is good to get the worst of the gas guzzlers off the road. I don't know though if those are the people taking advantage of the program.

I think you are correct that it is basically a positive for the economy and at best a wash for the environment. I'm disappointed by the easy standards sets for the program. My guess is the bill would have passed if it was clearly stated as a means to prop up the car industry alone. All of the hype about the environmental aspects doesn't match the actual data. I'd rather not have smoke blown up my skirt. I think people were a little misled about which *green* they were saving.

Betsy Talbot said...

An old high school friend on my Facebook page is a car dealer in Texas, and he says he has been swamped with people taking advantage of this program.

On the flipside, I went to a seminar this week and heard an "ecological economist" speak - first I had ever heard of that job!

We saw a preview of his documentary called "What's the Economy for, Anyway?" and it made a lot of good points about how we judge economic success in this country (mainly through the GDP). He said from a GDP standpoint, the Exxon Valdez oil spill in Alaska made more money for the economy than it would have if it had gotten safely to port (cleanup costs, lawyer fees, etc.). Makes me kind of queasy to think that this is how we judge our economic health.

It should be available online in about a month, so I'll send you the link when it does.

Kate said...

I hate to say it but... I think the clunker program is a clunker. The effect on global warming AND our economy will be a "blip". We need something more than a blip - something sustainable.

I'm excited about the Chevy Volt - did I really say I was excited about a Chevy? I've never said that one before. Event if the Volt doesn't get 230 MPG in real-world driving, it will be far ahead of the Prius.

Kristin @ klingtocash said...

I'm concerned about this program in a number of ways.

First, there are no income limits for this program which means that a multimillionaire can go in and turn in his clunker and get the $4500.

We are also putting a lot of people into cars they can't afford so they can get the $4500 (Wait, didn't we just do this with houses a few years back?).

The government is going to destroy all of these cars, some of them are in very good condition. This will raise the cost of used cars for those who need them.

Some of the cars on this list are not fuel efficient vehicles. The Hummer H3 is on the list! Really now!

I have a huge problem with the government coming in and spending money the country doesn't have on a crappy program that wasn't thought out.

Jennifer @ Improve Gas Mileage Guide said...

This is a tough call. It's really just another instance of the government getting involved in situations they shouldn't be involved in. However, if they're going to offer up free money to people, they should go and take advantage of the program.

However, I have seen cars that had a lot of life left in them get destroyed - practically new.

I agree with Kristin too - we're putting more people into debt when we do this. These people wouldn't have gone out to purchase a new car without this program, and $4500 doesn't make much of a dent.

Also, you can't buy a used car with this program - it HAS to be new!

More debt isn't good for the economy. That's how we got here to begin with.