Cash for Clunkers Lesson: How to Use the $$ to Buy a Gas Guzzler

GreenSky · 07-29-2009, 05:57 PM

I'm on my way to buy a Hummer.

Rick

Cash for Clunkers Lesson: How to Use the $$ to Buy a Gas Guzzler | Cato @ Liberty

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Cash for Clunkers Lesson: How to Use the $$ to Buy a Gas Guzzler

Posted by Alan Reynolds
My son’s station car is an old Ford Explorer AWD which, despite being a V-6, was rated at about 15 mpg.

Approaching 100,000 miles, the SUV’ s resale value is very low.

The House approved a bill to give him a $3,500 voucher to buy a car that is supposed to get only 18 mpg, or $4,500 if it gets 20 mpg. Only 18-20 mpg? That’s not moving us much closer to President Obama’s pie-in-the-sky 35.5 mpg goalpost is it?

Consider how easy it would be to game this giveaway program by using that $4,500 voucher to buy a big SUV or V-8 muscle car.

First of all, with Chrysler and GM dealerships folding, it should be easy to buy a mediocre Chevy Cobalt or Dodge Caliber for about $10,000 more than the voucher.

What you do next is sell that boring econobox, even if you end up with $1,000 less than you paid — that still leaves you with $3,500 of free money, courtesy of taxpayers.

As this process unfolds, the flood of resold small cars will make it even harder for GM, Chrysler and Ford dealers to get a decent price for small cars, because of added competition from new cars being resold as used.

That’s their problem, not yours.

So, take the $9,000 net from reselling the crummy little car plus the $4,500 from Uncle Sam. Then use that $13,500 to make a big down payment on a used Cadillac Escalade, Toyota Tundra pickup or Corvette.

File this under “unintended consequences” (my own file is running out of space).

AgentOrange · 07-29-2009, 07:31 PM

Great, so 1 person could theoretically be involved in 3 car sales ... think about that economic wheel spinning ... thats even better than I would hope; you get a hummer, I'll go buy your fuel efficient trade-in and some guy got a couple grand for his clunker. Think about how many people made money and are happy. whats the depreciation of a hummer at trade in again ?

padthaiforlunch · 07-30-2009, 05:39 PM

Conservative think-tank.

Think I'll add it to my list of oxymorons. Like jumbo shrimp and military intelligence.

Winter · 07-30-2009, 05:49 PM

Originally Posted by padthaiforlunch

Conservative think-tank.

Think I'll add it to my list of oxymorons. Like jumbo shrimp and military intelligence.

Speaking of oxymorons, right as I read this, I see Joe Biden on TV. How the heck did he get in on the beer session other than the fact that he has more experience putting his foot in his mouth than Barry.

Mr. Bill · 07-30-2009, 06:24 PM

You're kidding, right? Joe hasn't had a very busy week. You know, Monday he went with his wife to her doctor appointment, Tuesday, well, he looked at his schedule for the rest of the week and then HOLY CRAP it's Thursday already and looks like I have a bit of "free" time on my hands!

P.S. I just checked, and my Dodge Challenger doesn't qualify. Crap.

padthaiforlunch · 07-30-2009, 06:54 PM

Well who characterized the vice-presidency as worthless as a bucket of warm piss?

Mr. Bill · 07-30-2009, 07:41 PM

Is that a multiple choice question? I'm pretty sure I recall that Bill Clinton had a veep but maybe not. I think it was some guy who invented the internet. Maybe being the veep was just a night-time gig while Bill was sleeping.

armydad · 07-31-2009, 12:11 AM

If Gore had not "lost' Florida, the U.S. would have never invaded Iraq.

padthaiforlunch · 07-31-2009, 12:52 PM

John_Nance_Garner, who served as Vice President from 1933 to 1941 under President Franklin D. Roosevelt, remarked that the Vice Presidency wasn't "worth a pitcher of warm piss,"

Winter · 07-31-2009, 04:41 PM

Originally Posted by armydad

If Gore had not "lost' Florida, the U.S. would have never invaded Iraq.

If Bubba had kept his pants on and taken care of business (I mean government business) and killed Bin Laden when we had him in our crosshairs, maybe America would never have been invaded.

*midwestbroker* · 07-31-2009, 06:54 PM

It was a great one week program.

Germany did this. They have far less auto owners, and allocated $10 Billion. They ran out of money in a month...I do not know how our government officials thought $1 Billion would last to November.

I believe the oxymoron you were looking for was Intelligent Government Plan

xrac · 08-01-2009, 01:59 PM

CASH FOR CLUNKERS CHAOS

Clunker rebates count as taxable gross income, IRS bulletin says

Donna Harris

Automotive News | July 31, 2009 - 6:28 pm EST

It turns out dealers will have to pay taxes on the thousands of dollars in rebates they receive under the federal cash-for-clunkers program, according to an IRS advisory bulletin issued today.

The cash-for-clunkers measure, known as the Consumer Assistance to Recycle and Save Act of 2009, exempts consumers who take advantage of the program from paying taxes on the rebate. But it does not exempt car dealers.

"Gross income generally means all income from whatever source derived unless specifically excluded by law," wrote Terri Harris, who heads an IRS division specializing in automotive issues. "Gross income derived from a business means the total sales, less the cost of goods sold."

It likely will be treated like a cash downpayment from the consumer.

A NHTSA official assured car dealers listening in on a National Automobile Dealers Association webinar Monday that they would not be taxed on the rebates.

"What you are dealing with are people who don't understand accounting," explains Dick Heider, a Denver-based dealer accountant. "This is a normal payment like in any car deal whether the money comes from the bank, the manufacturer or the government."

Asked why dealers might have been confused about their tax obligations, Heider said they may have thought that because consumers didn't have to pay taxes on the rebate, they also would be exempt.

Says Heider: "It's still money in their pocket."

Rivers1 · 08-01-2009, 09:26 PM

This program was set-up to help auto dealerships move vehicles. I see many new car loans going out to people who won't be able to afford them. What does that create? Another credit quagmire. Great!!

policy doctor · 08-01-2009, 10:55 PM

It will also decrease availability of used parts for repairing.

So more people will be forced to buy newer cars.

Charpress · 08-02-2009, 09:33 AM

Every time I see someone getting $4,500 from "the government" to encourage them to get something they probably don't need and likely can't afford, I really just see $4,500 coming out of my pocket.

When a kindly stranger gives away enough lollipops, then the kids won't think twice about getting into the car.

Still thinking about the $2,000 Katrina giveaway that caused a shortage of big-screen TVs and designer purses.

0b1kanobee · 08-03-2009, 11:13 PM

The government is watching you and taking over your computer with Cash For Clunkers, you got to see this:

YouTube - Glenn Beck: Government Website Takes...

Ya know what? I think this CARS Program is the precursor for a tax on the Gas Guzzlers among other extravagant toys... It's like - I gave you a chance to get rid of em - now ya hafta pay the piper.