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The Car Allowance Rebate System<\/a>, also known as the Cash for Clunkers Bill<\/i> became effective on Monday, July 27th. I always started thinking of replacing my car when it was about 7 years old. But I wouldn’t be in a hurry. I would slowly narrow, or widen, my choices and wait for the best deal to come. It would be an exciting event for the whole family to get a new car. Its arrival, however, would take me out of the market for another 7 to 10 years. I turned out to be quite typical; Americans drive their cars for about 9 years<\/a>. The odds of I buying two cars in two years is the same as I winning the lottery.<\/p>\n A limited time incentive basically shifts future purchases to present time. One of the best deal in the car industry is 2nd or 3rd year used cars, usually %70 or even %50 of the new car price. $4,500 is enough incentive for a would-be used-car buyer to go for a new one. For the society, the economic boom at the new car segment is offset by the loss at the used-car lot.<\/p>\n It turns out not quite easy to get government’s money anyway. A 2002 Chevy Tahoe guzzles at 14 MPG (miles per gallon) but is worth more than $4,500. Its owner has no economic incentive to do it. An 1986 Lincoln Continental, pretty much a stereotypical clunker, is actually too fuel efficient, at 19 MPG, to qualify. Let alone those Japanese small cars.<\/p>\n Update: July 31st<\/p>\n \nApparently, clunkers exhausted the entire $1 billion coffer in a week. I saw a news episode that an old lady spent $600 to fix her car so that she can drive it into the dealership: drivability is a requirement for this program.<\/p>\n Congress, quickly, appropriated another $2 billions and guaranteed that this program will last until November, the originally designed end date.\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":" The Car Allowance Rebate System, also known as the Cash for Clunkers Bill became effective on Monday, July 27th. In a nutshell, you will receive up to $4,500 for your “clunker” when you buy a new car. That clunker will … Continue reading
\nIn a nutshell, you will receive up to $4,500 for your “clunker” when you buy a new car. That clunker will be taken out of the circulation and sent directly to the junk yard. The idea is to encourage people to upgrade to more fuel-efficient cars and, at the same time, stimulate the much troubled car industry.
\nLike all social programs, this one will work exactly as designed, but probably not how it was intended.<\/p>\n
\nWhen Chrysler and GM closed hundreds of dealerships, they created a discount heaven and deal bonanza for many car buyers. The Cash for Clunker<\/i> program will be the second large price reduction this year. What would have seemed like a great selling season will be followed by a long fallow. Americans are, again, borrowing from their future: just like during the sub-prime time.<\/p>\n
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