Cash for clunkers - Grandma doesn't qualify

I saw this story on NBC this morning, now it's popping up everywhere. Seems 90 year old Rachel Veitch in Florida has over 557THOUSAND miles on a car (some reports say 559Thousand). No, it's not a Honda or Toyota, it's a Mercury Comet. Made in the USA in 1964. Back in the day, when you bought a car, you named it. Her car is named "Chariot." (my first was "Red Bird", third was "Betsy" -- can't remember second).

Veitch said her "Chariot has never lied to me or cheated on me and I can always depend on her." (source here) It "has outlasted her three marriages and has gone through eight mufflers, at least 17 batteries and three sets of shocks" according to this story. She says that she's a believer in maintaining a car, "I've never been a destructive person and I've just taken care of everything, except my husbands."

According to reports, she's had the car up to 120mph (as high as the speedometer goes) and once got a ticket for going 92mph (she installed a cruise control after that). She even got to take the car onto Daytona Motor Speedway once.

Clark Howard, the master penny-pincher picked up the story. When Veitch started driving her Comet, gas was 39cents/gallon. Even though the car only gets 15mpg (well below the CARS threshold of 18mpg), she isn't eligible for the program. Her car is 45 years old and CARS is limited to 25 years old or younger.

Even if it did "she'll never sell, and she packs a .38-caliber handgun in case anyone tries to take her chariot for a ride without her."

Somehow, I don't think I'd mess with Grandma...

(Photo credit here).

Cash for Clunkers - Continued

Well, it looks like it's official (see here), the Senate has now approved an extension of the Cash for Clunkers bill. The bill was either a huge success or a huge expenditure depending on your point of view. It's a redistribution of wealth from the taxpayers (only 50% of Americans) to those who are in a position to buy a car. Or maybe it's another bailout for car manufacturers.

Some interesting information has come out about the program and actually a lot of details have not come out. But so far, it looks like GM has been the biggest winner with 18.7 percent of new sales. Ford has actually seen a profit. From my previous post, I showed how the increase in sales was short lived, so I hope Ford is investing the profit wisely - it won't last.

Another report I saw said that Ford Explorers were the most traded in vehicle along with older mini-vans. My suspicion is that these owners had been waiting to get rid of their "clunkers".

Remember the program had a dual purpose: #1 to help the auto industry and #2 to increase fuel efficiency. If the Ford Explorers and mini-vans were actually being used and the new cars are taking their place, the second goal will have been reached. I suspect the less fuel efficient cars weren't in heavy use and the newer efficient cars will be used by new drivers, thereby increasing overall fuel usage. (I considered selling a clunker and getting my wife a new car, but I didn't qualify).

Details of the clunker program have been hard to find. The AP reports that the "Obama administration is refusing to release government records on its "cash-for-clunkers" rebate program that would substantiate — or undercut — White House claims of the program's success." So despite promises of "transparency in the people’s White House," things seem to be mostly cloudy. I guess like the stimulus plan, we don't have time to be forthcoming, we have to act now.

My main concern though is the change in the program. The program was initially approved (after a lot of discussion) for $1BILLION or until November 1, which ever came first. We've reached the $1BILLION mark, so the program should be ended. The expansion is going on without any real analysis. Everyone's having a good time, so we just go on spending.

Some of my kids have learned (the hard way) that only the Federal Government can continue spending when they run out of money. In this case, the government doesn't even know how much it has. It's like ignoring the balance column in the checkbook register (do people still use those?)

The new bill should have gone the way of the clunkers -- into the shredder. What do you think?

Cash for clunkers

By now you may have heard that the "Cash for Clunkers" program is broke (or not depending on who you listen to). This post is NOT about that issue. The story on that issue is not yet complete. I may post about that in a week or so when all of the facts are out.

Back about a year ago, I posted an entry about the cost of a gallon of gas (about $4 at the time). A year ago when gas was $4/gallon, I made the bold prediction that "the subject of gas prices will be quiet again." (see here).


Well, let's check into the current situation. People have criticized American automotive companies and said that they focused on trucks and SUV's. During times with high gas prices, this hurts auto sales and, according to critics, helped cause the downfall of GM, Chrysler and Ford. However, prices are down now, around $2.20 or so depending on the day. It now appears that SUV sales are back up (according to Bloomberg) and truck sales are also on the rise (see here). Maybe American car companies were focusing on the right markets after all.

Of course, you have to acknowledge that everyone wants to save gas and go green right? Well, Toyota is having a tough year just like the American companies and has decided to close a Mississippi Prius plant even before it opened (see here). In fact, Motor Trend magazine says Toyota is no long profitable in the US. Seems it's not just American cars that are hurting.


So what does this have to do with "Cash for Clunkers"? The program was initially designed to improve fuel mileage on the highways by encouraging consumers to get rid of older, less fuel efficient cars in favor of newer, more fuel efficient cars. A side benefit is that the ailing automotive market (both domestic and foreign) gets a short-term boost.

The program has been tried in other countries as well. Countries such as Slovakia, France, Germany, Spain and Italy have all unveiled a cash-for-clunkers program at various times in the last year according to this NY Times article. And the program has some history as France had a "similar incentive program ... from 1994 to 1996."

How successful will the program be? According to the same NY Times article, the "plan produced a comparable sales bump initially." Sounds great, right? Well the rest of the sentence goes on to say that the initial sales bump "was followed by a severe drop in 1997 and 1998."

So here's my prediction for 2009 and it will basically echo the prediction from 2008. Americans are less concerned about fuel efficiency than they are about the size of the vehicle (see SUV sales and truck sales above). People will trade in cars under the plan and get minimal improved gas mileage (2 mpg improvement for trucks and 4mpg improvement for cars is the minimum to get the cash). More importantly, these people will take out 4, 5 or 6 year loans to pay for these cars and find that they have trouble making the payments or making their other payments (e.g. mortgage). Next year, we'll all be worse off.

And the country will be no greener than it is today.