Stimulus, indeed! Car dealers turned in 642,277 vouchers to the the Cash for Clunkers program, and they’ll get $2.7 billion from the government, according to the latest statistics.
But the program, some consumer experts say, was poorly designed and executed, saddling dealers with risk; consumers with precious little protection; and taxpayers with the bills.
For the $4,000-plus per car that taxpayers shelled out, “we could have gotten a lot more,” wrote Lisa Margonelli. a senior research fellow with the New America Foundation in a piece in The Atlantic.
“Consider this: C4C only required a fuel economy increase of 2 mpg over the original car,” she wrote. “The auto companies can raise the fuel economy of cars on the assembly line by that much at a cost of $500 per vehicle. So, we could have given our $2.87 billion to the auto companies to upgrade 5.5 million cars by 2 mpg or more.”
Rosemary Shahan, president of Consumers for Auto Reliability and Safety in
We told you yesterday about Dan Hoang and Tara Bui, who thought they traded in their clunker, a 2001 Nissan X-Terra, and were surprised to find it for sale by the dealer, Volkswagen of Garden Grove . The dealer says it accepted the car as a trade-in, and never applied for cash-for-clunkers money from the government.
A misunderstanding? Or something more?
“The couple there is not alone in thinking there is something really wrong in this program,” said Shahan. “In their case, it’s very strange that they intended it to be a cash-for-clunkers transaction, and the dealer did a trade-in. It sounds like it could be a form of bait-and-switch. It certainly defeats the purpose of the program to sell a clunker all over again. But the government set it up in a way that was flawed from the beginning.”
Flaws: Putting car dealers in the position of deciding whether a car qualified as a clunker; making dealers take a risk, watching cars drive off the lot when they’re unsure if the government will accept the clunker; and then making dealers wait weeks to find out if they’ll get reimbursed.
The consumer, meanwhile, was left exposed. Shahan heard many reports of clunkers that wound up being used as trade-ins instead; of prices that rose; of people who wanted a type of car that was no longer in stock and who wound up with something else. Hoang and Bui wanted a clean diesel Jetta, but wound up with a regular Jetta instead.
“They could have probably gotten that deal or a better one on the car they actually wanted if they had held off,” Shahan said. “What’s happening was, they were selling everything and running low on inventory and raising prices. Did people actually get a break? Some people did get good deals. But for some, the benefits were illusive.”
“I wish they had done it differently,” Shahan said.
How? If consumers had been able to pre-qualify directly with the government, they could gotten a voucher to take to any dealer, and much hassle would have been eliminated.
Margonelli of the New America Foundation: “If we’d turned the $2.87 billion into loan guarantees we
could have offered $57.5 billion
in low interest auto loans–enough to finance 3.8 million cars at $15k a pop. Now THAT would have created a
This may not be academic: There is talk of resurrecting cash-for-clunkers in the not-so-distant future. And from the dealers perspective, it was certainly worth it.
Says the California New Car Dealers Association, citing federal statistics: “84% of trade-ins under the program are trucks, and 59%of new vehicles purchased are cars. The program worked far better than anyone anticipated at moving consumers out of old, dirty trucks and SUVs and into new more fuel-efficient cars.”
The average fuel economy of new vehicles is 24.9 MPG, while the clunkers had an average of 15.8 MPG. “Overall increase: 9.2 MPG, or a 58% improvement,” the car dealers said. “Cars purchased under the program are, on average, 19% above the average fuel economy of all new cars currently available, and 59% above the average fuel economy of cars that were traded in. This means the program raised the average fuel economy of the fleet, while getting the dirtiest and most polluting vehicles off the road.”