Quite a controversial headline wouldn’t you say? I would bet you think my tone may be a bit strong, but I think I have just cause.
The “Cash For Clunkers” plan that Congress has approved is an absolutely stupid idea. Sure, it sounds nice. Bring your gas guzzling vehicle to a dealer and they’ll apply a government issued voucher for up to $4,500.00 which would be applied towards the purchase of a more efficient vehicle of 22MPG or higher according to the Associated Press and Foxnews.com.
Why Is This Stupid?
Cars go down in value, and the program is going to entice people to drive their perfectly good vehicle, which in most cases is going to be paid for, and has already lost most of its value, to the dealer where they’ll get sucked into financing a newer vehicle.
THIS IS GOING TO TEMPT PEOPLE TO GO DEEPER INTO DEBT by investing their money in a consumable product that goes down in value, not UP! Not a good plan.
Why Is This ULTRA Stupid?
The dealerships must agree to destroy the “clunker.” Are you serious? Who are these people!? For those who have “clunkers” that work just fine, the market for resale to people who are a bit smarter with their car purchases is eliminated. All of those people who would love to buy a used car won’t be able to.
Let me explain what a smart car purchase is. Save, pay cash, then save, then upgrade with cash. Repeat. Let’s say you bought a car for $2000.00 cash. Sure, it wouldn’t be luxurious, but it would get the job done. Then, for 10 months, you saved on average $300/month and put it into a car fund.
“How am I going to save $300/month?” You dummy! How are you going to afford $300/month for a car payment?
After 10 months, in a car that has already lost most of its value (someone else took that hit, hopefully) plus $3000.00 (10 months X $300.00) you are able to trade your $2000.00 “clunker” in for a $5000.00 “clunker.”
Do this for another 10 months and you can upgrade to an $8000.00 car. Another 10 months and you’re in a PAID FOR car for $11,000.00. Another 10 months and you’re driving a fairly nice 2-3 year-old car worth about $14,000.00 and it’s only taken you 40 months to get there. AND IT’S PAID FOR. That’s a little over 3 years.
Buy a new car, and you’re stuck with $300.00+ payments for at least 60 months. As Dave Ramsey says, “stupid tax.”
The amount of gas that you’ll save by upgrading from your SUV to a newer, more efficient car will be all but wiped out by the loss of value you’ll incur with the car you borrow with your $4,500 voucher.
Shredding perfectly good older cars that someone might treasure for the sake of luring someone who can’t afford a more expensive car into debt is a stupid and very wasteful plan. Besides, WHERE IS THE MONEY COMING FROM?
