Bob Ulrich

Editor

Bob Ulrich was named Modern Tire Dealer editor in August 2000. He joined the magazine in 1985 as assistant editor, and has been responsible for gathering statistical information for MTD's "Facts Issue" since 1993. He has won numerous awards for editorial and feature writing, including five gold medals from the International Automotive Media Association. Bob earned a B.A. in English literature from Ohio Northern University and has a law degree from the University of Akron.

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Cash for Clunkers law appears to be working

By: Bob Ulrich

Like it or not, the so-called “Cash for Clunkers” program appears to be working. Some 250,000 cars have been sold in direct response to the plan President Obama hoped would jump start car sales.

However, the $1 billion the government earmarked for the program, officially named the CARS Allowance Rebate System (CARS), has been used up, prompting the current administration and Congress to find $2 billion more to keep CARS going. They will.

The week-old program spent $1 billion. If that trend continues, another 500,000 cars will be sold in the next two weeks. Then the program will be over.

Is 750,000 vehicles sold -- a 30% increase in average sales per week compared to last year -- enough to classify the program as a true success? Time will tell if the specific goal of getting people to buy more cars leads to the ultimate goal of strengthening our economy.

If the domino effect is positive, then I think the positives will outweigh the negatives. According to the Automotive Aftermarket Industry Association (AAIA), there are a number of problems with the law:

* “By taking vehicles off the road that might be sold as used, the program will raise the price for all used vehicles, thus impacting those on limited income that cannot afford new vehicles.”

* “Since the parts on those vehicles that are scrapped could be sold as used or reconditioned, the program will cause an increase in repair prices for consumers.”

As for the environmental impact, Aaron Lowe, vice president of government affairs for the AAIA, says there is a flaw in the law. Yes, replacing older cars with new, more fuel efficient vehicles will reduce emissions and save oil.

However, the scrapped vehicles “will more than likely be sent to landfills, creating more pollution, not less.” (The CARS program requires the scrapping of a vehicle owner’s eligible trade-in vehicle.)

As is the case with anything the government touches, there is plenty of red tape, which has led to both frustration and confusion for auto dealers and consumers alike. To fully understand the Cash for Clunkers program, a dealer has to read through 136 pages of legalese. One slip up in the rules and the government can deny the $4,500.

Still, using the average vehicle cost as a guide, the CARS program will bring between $15 million and $18 million into an industry desperately in need of help. I know companies like Hyundai Motor America , Nissan North America Inc., American Honda Motor Co. Inc., Toyota Motor Sales U.S.A. Inc. and General Motors Corp. (specifically Pontiac) have been advertising heavily in Northeast Ohio.

We may never know if stimulating the economy artificially with the Cash for Clunkers program was necessary, but bottom-line success will be good enough for me. 

For more information on the program, visit www.cars.gov.

Related Topics: AAIA, Cash for Clunkers, Government regulations

comments

1. Ken | August 04, 2009 at 08:35AM
   Where do I begin?
   
   1. This ruse stopped people who were going to buy cars sooner or later. Free money 3500 - 4500 dollars the government had to print and/or tax myself and kids in the future.
   
   2. Destroying drivable cars, NOT CLUNKERS, is WRONG. Just watch a YouTube video of the destruction of a perfectly good vehicle. If this does not make you sick, you have no soul.
   
   3. Destroying driveable vehicles removes transportation for people who can not afford a new car, all in the name of saving the planet. Tell that to the guy trying to buy a used car he needs for his family and to drive to work.
   
   4. The program continues to teach that the government will save the auto industry and provide a "free" handout to people if things are tough. This is NOT the governement's responsibilty period. They disrupt the market place.
   
   5. "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." Alexis de Tocqueville Sadly, we are there.
   
   6. Lastly, the President's spokesman, said the deals would be honored during the weekend, AFTER the government said they had probably used up the 1 billion dollars. Talk about putting the tab on the government credit card. There is NO guarantee the money will be approved by congress and yet the Obama administration is saying "go out and spend?"
   
   The day of fiscal reckoning is soon approaching.