Cash for Clunkers hurt the poor more than it helped the environment
Via Mark Thompson, it looks like the Cash for Clunkers program was a huge success if the intended goal was to remove lots of cheap, affordable used cars from the market, forcing low-income buyers to buy more expensive new vehicles:
In his 20 years in the business, salesman Mark Sauer has never had a tougher time finding inexpensive used cars.
“It’s never been this bad,” said Sauer, buyer and sales manager of Vaccaro’s Auto Buyers of Reading, 805 Hiesters Lane.
The trend is occurring nationally as well.
The Manheim Used Vehicle Value Index reported that prices reached record highs in September. The consulting firm that publishes the index blamed low inventories.
That’s bad news in Berks, where many shoppers seek inexpensive, used vehicles, especially during difficult economic times, said George Tabakelis, general manager of Perry Auto Service & Sales on Route 61 in Perry Township.
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“You used to be able to find a decent car for $2,500, and you can’t anymore, especially in the past two months,” said Arie Garcia, the association’s office manager.Another problem is that used-vehicle prices have quickly risen above their book values, making it tougher for customers to secure financing, Garcia said.
“Cash for clunkers really hurt the used-car industry,” she said. “I think it hurt more people than it helped.”
This is the unintended consequence of big-government intervention into the economy. This is the unseen side-effect of economic populism. Protecting one industry – the auto-makers – might sound great if it helps save jobs and drive the economy. But we always have to ask ourselves – “Who is this going to hurt?”
Usually it’s the poor. Just something to think about.
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- Used Car Prices Hit Record High (blogs.thecarconnection.com)
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Could this problem be as temporary as the boost in car sales and GDP that ‘clunkers’ caused? I.e. next quarter, when no one is giving car buyers an incentive to get rid of their ‘clunkers,’ will we find that more used cars are available again because instead of sending their old cars to be compacted, people will fire sale them off at a used car lot?
Also, I have to say, this story you refer to makes it sound more like the used car business is hurting, and less like the prospective used car owner is feeling the pain. When you hear a used car dealer saying, “I just can’t sell cars cheaper than $5,000 anymore,” but no customers complaining about the problem, well, it gets my spidey-sense tingling.
The problem is primarily with the requirement to crush the clunkers. It would have been just as stimulative to let the dealers re-sell the clunkers, and would have kept a good few cheap cars in the market for low-income buyers. There was really no need to require demolition of old vehicles.
In response to another comment. See in context »Maybe…but then wouldn’t we see a glut of used cars on the market and dealers complaining that they couldn’t sell any of their inventory at a fair price? The most market-friendly solution in this case probably would have been to do nothing.
In response to another comment. See in context »Mr. Kain,
I suspect that with all of the problems poor people are having right now, finding a used car is not the any where near the top of their list.