Not that I’m Always Right or Anything…
Several months ago, I wrote a post explaining that Cash for Clunkers had destroyed the used car market. Later, I had a long twitter debate with well-known Democratic blogger in Tennessee, who swore up and down that Cash for Clunkers had worked. He had a similar debate with another Tennessee conservative this week on Twitter.
Yeah, it turns out I was exactly right. Back in June, I wrote:
Yes, capitalism is harsh. But you know what’s even worse? The government interfering with markets that indirectly end up hurting the very people they claim to be helping.
Sadly, I hate gloating on this one. This is a real economic problem that has devastating effects on low income people. For many Americans, having a car isn’t a luxury. I realize that most liberals live in urban enclaves with public transportation systems, so this can be a difficult concept to grasp. Most Americans live in rural or suburban areas. Having a car is the only means of getting to and from work or the store. In my previous post, I shared my difficulties in finding a late model Honda compared to a similar car search I had in 2007. Paying $1,800 more for a car is painful, especially for those of us on budgets. Hot Air notes:
As predicted last year, the people most hurt by the price increases are those who can least afford them. The used-car market usually attracts people who need transportation on a budget, who cannot afford to buy new. By destroying a quarter’s worth of trade-ins in three weeks and permanently taking them off the market, the Obama administration has forced an artificial inflation by supply restriction. Moreover, they did so by subsidizing new-car sales that would have occurred anyway, eating up three billion dollars in taxpayer money.
In other words, the White House spent $3 billion to make used cars more expensive for working-class families. Nice work.
Great job, Obama Administration. Please, stop trying to fix the economy! The American people may actually survive this storm if you just sit on your thumbs in the White House and enjoy the perks. Perhaps Pelosi and Reid can take up Obama’s golf schedule?
I’m late to this entry, but you have emphasized only part of the economic cost of car ownership. While the Cash for Clunkers program did push up the price of used cars, it did by removing older, less efficient cars from the market (decreasing supply).
However, those that did buy a used car, they would have a more efficient car. Assuming that the car got 5 miles per gallon better (not that big of a jump), and the average American drives 12,000 miles a year, that would translate into a $330 savings per year. It would take roughly 6 years to make up the difference in gas price alone.
(12,000/20mpg – average fleet number – = 600 gallons vs. 120,000/25mpg = 480. 120 gallon difference x $2.75/gallon)
But we haven’t talked about the difference in maintenance cost. While tough to quantify, I think there would be significant savings by having a used car with less wear and tear than an older one.
So while the initial cost was higher, the total cost of ownership can actually be lower during the lifetime of the car.