Saturday, October 3, 2009

Cash for Clunkers Revisted

Cash For Clunkers
If you traded in a clunker worth $3500, you get $4500 off for an apparent "savings" of $1000.

However, you have to pay taxes on the $4500 come April 15th (something
that no auto dealer
will tell you). If you are in the 30% tax bracket, you will pay $1350 on that $4500.

So, rather than save $1000, you actually pay an extra $350 to the

In addition, you traded in a car that was most likely paid for. Now you have 4 or 5 years of
payments on a car that you did not need, that was costing you less to run than the payments
that you will now be making.

But wait, it gets even better: you also got ripped off by the dealer.

For example, every dealer here in LA was selling the Ford Focus with
all the goodies including
A/C, auto transmission, power windows, etc. for $12,500 the month before the "cash for
clunkers" program started.

When "cash for clunkers" came along, they stopped discounting them
and instead sold them at
the list price of $15,500. So, you paid $3000 more than you would have the month before.
(Honda, Toyota, and Kia played the same list price game that Ford and Chevy did).

So let
s do the final tally here:

You traded in a car worth: $3500

You got a discount of: $4500

Net so far +$1000

But you have to pay: $1350 in taxes on the $4500

Net so far:

And you paid: $3000 more than the car was selling for the month before


We could also add in the additional taxes (sales tax, state tax, etc.)
on the extra $3000 that you paid for the car, along with the 5 years of interest on the car loan but lets just stop here.

So who actually made out on the deal? The feds collected taxes on the
car along with taxes on the $4500 they "gave" you. The car dealers made an extra $3000 or more on every car the y sold along with the kickbacks from the manufacturers and the loan companies. The
manufacturers got to dump lots of cars they could not give away the
month before. And the poor stupid consumer got saddled with even more debt that they cannot afford.

Obama and his band of merry men convinced Joe
Consumer that he was getting $4500 in "fr ee" money from the "government" when in fact Joe was giving away his $3500 car and paying an additional $3350 for the privilege.

-from an email I received, I did not write this.

1 comment:

Cars4Charities said...

Cash for Clunkers was a disaster from the start. All it did was destroy 700,000 running cars. Because of this auto repairs and car donation is down and used car prices are up.