Frugal Missus Gets Honest

There has been so much talk about the federal gov'ts Car Allowance Rebate System (CARS), aka"Cash For Clunkers" program that I felt compelled to write something about it.

When you get down to the brass tax, C4C is just a way to draw Americans further into debt by offering what seems like a great deal (either a $3500 or a $4500 cash rebate) on a new, more fuel efficient car when you trade in your "gas guzzler". That's $3500 - $4500 off a new car, but, really? You are still paying THOUSANDS of dollars you would otherwise not be spending by signing a new lease or loan. I've got an even greater deal in my driveway! A fully paid for reliable vehicle that passes smog. Check it out! I just saved $20k+!!

Now, I know there are a few folks out there that have cars that really should be off the road for a number of reasons (environmentally unsound, safety hazards, etc.), but a vast majority of the people that I've heard cashing in on the C4Cs program are just trading in their minivan for a newer minivan that happens to get better gas mileage. Of COURSE it's fun to get new toys! I mean, who isn't intoxicated by the smell of new car? I am!

There are a couple of things I see wrong with the C4Cs program rules:

1) For passenger automobiles, the new vehicle must have a combined fuel economy value of at least 22 miles per gallon.

I used to drive a 1997 Saturn SL2 that got 26 miles per gallon. I don't see the 22 mpgs as a huge improvement.

2) ...The Act directs NHTSA to set up a program in which owners of vehicles meeting statutorily specified criteria may receive a monetary credit for trading in their vehicle and purchasing or leasing certain new vehicles.

NEW vehicles. You know, the ones that depreciate at the exact moment you sign your John Hancock on the dotted line?? I found this pretty cool website that allows you to calculate your cars depreciation. Here are the examples I did:

Car Price: $25k

Years old when purchased: 0 (ie NEW)

Age of Car at Time of Estimated Value (in years): 1

Car Deprecation: $6250

Estimated Value: $18750

Car Price: $25k

Years old when purchased: 1

Age of Car at Time of Estimated Value (in years): 2

Car Depreciation: $3000

Estimated Value: $22k

You read that right. That $3500 you got in rebate from C4C on a NEW car doesn't even cover depreciation of the first year! You could get a great used car and save almost the entire "rebate" amount, and not have had your "investment" slashed so dramatically in the first year! Not to mention, $25k for a new car and $25k for a used car can be quite a difference when looking at the bells and whistles. It could be the difference between leather and cloth seats, or the XM radio package and a stock CD system.

3) The CARS Act provides two limitations on the duration of the program. First, the program ends November 1, 2009. Second, NHTSA has been appropriated a fixed sum of money ($1 billion) to fund the program.

1 billion dollars. To keep the American Public in debt. Well, I guess I shouldn't be surprised when I look at this. Don't we have teachers to pay, potable water to find, and a housing market to fix? Hey, Federal Government Folks, hows about you send me a $4500 check for having paid my mortgage on time every month?

Oh, and this original $1b (that ran out in a matter of days!) doesn't include the possible additional $2b the Assembly approved last Friday for the program (still waiting on the Senate to approve). Go big or go home, right? I mean...we're already in insane debt as a nation. What's a couple billion more? Hell... let's send some to Dr. Evil while we're at it, hrmmmmm???

Ok. I'm almost off my soapbox. One more thing...

A car payment is NOT a way of life!

We have 1 car payment (just paid off a Ford Explorer last month) and once the second car payment is done, that's it for us. Done. Finito. Our Explorer is most certainly still in drivable condition. It's still rather comfy. It fits our family and our needs. No, it doesn't smell like new car anymore. Yes, it has a couple scratches on it. Yes, there are some stains on the carpet. But it's PAID FOR. For 6 years, we paid $542.10 every month. We now have $542.10 in our income to pay off debts every month that we didn't have for the past 6 years. Once our second car is paid off, we'll have almost $1100 A MONTH in our pockets. With that, we'll be saving for a while to purchase a great used car WITH CASH.

So, Cash For Clunkers? I don't think so... at the risk of offending some readers, I think it would be more aptly called Debt for Suckers.

Hey man, I told you was getting honest in the post title.