Clunkers

My cars don’t quite count as clunkers. Sure, all of them have over 100k miles. Sure, the newest of them is a 2000. Sure, the car I drive doesn’t get great mileage. But none of them are listed as clunkers. But what if one was a clunker?

The ideas behind the “Cash for Clunkers” program include (a) stimulating economic activity (and the auto industry in particular) and (b) getting more fuel efficient cars on the road. Those are good ideas. But are they enough?

If my car were on the clunker list, then I could get up to $4500 for it. Then if I wanted a new car that cost $20,000 it would only cost me an additional $15,500.  The new car would get better gas mileage, so I would save some money that way, too. Let’s suppose my current car averages 19 mpg (if it were less, it would count as a clunker) and I “trade” it for a car that averages 35mpg, and gas averaged $4 a gallon, and I drove 20,000 miles a year, I would save just over $1900 dollars a year. Saving that much sounds like a good idea to me.

But if saving money is my goal, then I would save even more by not trading my car. It still has some life left in it – probably a few years. Each year I don’t buy a new car, I save more money. Sure, I spend more on gas than I would like, but since I’m not making a car payment, I can afford it.

I’m blessed with a job. I have a regular pay check. If I had to make a car payment, I could. But can all the folks taking advantage of “Cash for Clunkers” afford a new car – even if their clunker counts as a nice down payment? If the economy rebounds, and they can keep their jobs (or get jobs) and make the payments.

But I have a recollection that one of the major things that got us into this mess was our propensity to spend beyond our means. The economy needs us to spend more – for consumption to rise. But consumption will not reward us for long. The economy is not a very benevolent god for the long term.

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One Response to Clunkers

  1. I drive a 2003 and Steve’s truck is a 96. The mileage on the truck is 175k and my car has about 70k. New cars would be nice, but no car payment is better as far as I am concerned. Having a new car has never been something I care about. I just want it to get good gas mileage and get me where I am going. With our economy the way it is I think that getting yourself into making another payment of some kind doesn’t seem like a smart thing right now for most folks. I also don’t like the idea that the governemnt is funding this all which will cause more debt for the nation.

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