There's a federal
cash giveaway for almost everything on four wheels except things
that make economic sense.
Two years ago,
the government paid people to throw away perfectly good older cars
many of them fully paid for and paid them to buy a new car to
replace it (even though most people could only buy a piece of the
new car and had to sign up for a loan to cover the rest). It was
called "Cash for Clunkers" and while its stated purpose was to get
more fuel-efficient new cars on the road, it's real result was to
drive up the cost of used cars (by dint of lowering the supply)
so that people who lived within their means and tended not to
buy new cars suffered higher prices so the less responsible (and
opportunistic) could motor around in new cars partially paid for
by their taxes.
Let me share
an anecdote with you about the effect of Cash for Clunkers on the
cost/availability of older used pick-up trucks.
the program began, I bought a 2002 Nissan Frontier with less than
60,000 miles on the clock for $7,000 cash. (I never finance anything;
paying for what you can afford is a key secret to avoiding the Debt
Dervish that has consumed so many Americans' lives.) That's about
what trucks like it were selling for, pre-Clunker.
two years later and now truck now two years older I can't find
a single similar condition/mileage example for much less than $10,000.
(See for yourself. Go search www.autotrader.com
which has regional as well as national listings. It's an excellent
barometer for current retail/wholesale used vehicle prices.)
on behalf of all the people who would have liked to buy (probably
outright) an older truck with years of life still left instead of
signing up for a loan on a new one but can't now either because
the trucks aren't available or because they're just too damn expensive.
Next up the
federal giveaway for hybrid and electric cars like the 2011 Chevy
Volt. It is an economic oxymoron. Built to save gas, it burns money
instead rendering the exercise moot. With a base price of $40,280
the Volt costs as much as a loaded 2011 BMW 3-Series luxury-sport
sedan. A person in a position to buy a $40k car is by definition
not a person who worries much about gas mileage or to be more
precise, needs to worry about gas mileage. Thus the Volt
is a vanity purchase, an example of 21st-century Green Snobbery.
Look how much I care about the planet! (Like Al Gore holding
forth about greenhouse gasses as he motors along in his $60,000
Cadillac Escalade SUV. See the movie. They forgot to edit out this
most revealing scene.)
You may find
Volts parked in front of $400,000 suburban homes occupied by white-collar
workers with six figure incomes. You won't find them parked outside
$75,000 condos that house people who earn $40,000 per year and
who would never spend $40,000 on a car (any car) because they
can't spend $40,000 on a car.
"help," that is.
sweat high gas prices drive $8,000 used Corollas or maybe a new
Ford Fiesta which by the way gets 41 MPG on the highway and costs
a third what Chevy wants for its electric Albatross.
So once again
enter Uncle. He is offering $7,000 of your money to nudge other
people to buy the Volt. Why not just give them a $7,000 voucher
for free gas instead? It would cut out the crony capitalist middleman
GM and probably cost less, too.
Of course the
problem there is not everyone gets a check. The way our system
works, some use the government to feed off others.
GM uses the government to extract money from some of us, in order
to offer financial incentives to others, so that they will "buy"
GM's economically impossible high-tech lemon.
the people who "buy" the Volt benefit.
More precisely, responsible people who try to live within their
means and not off the backs of others lose.
In a rational
world, without artificial "incentives" that throw everything off,
people would buy cars they can afford and which make sense for them
and their situation. The automakers would build cars to satisfy
that demand, instead of throwing cash and not their own cash
like so much confetti at projects that aren't ready for prime time
or which can't make an economic case for themselves.
use the distorting power of the government to encourage people to
throw away perfectly good cars, either in order to encourage them
to buy new ones they probably could not afford on their own and
which often entail signing up for a new load o' debt they need like
Oprah needs another serving of pie.
But, what can
you do? It's either cash in and grab the subsidy or be the sucker
who helps pay for them and gets nothing in return.
[send him mail] is an
automotive columnist and author of Automotive
Atrocities and Road Hogs (2011). Visit his
© 2011 Eric Peters
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