I'll be curious to see how successful this program is. Although it's well intended I suspect not much will come of it for the primary reason that people who drive these "clunkers" can't afford new cars.

My understanding is that the "clunkers" traded in will not be resold, which means that these cars are all typically worth less than a grand or two. And in our consumerist society, people who can afford new cars generally aren't driving around in a car worth that little. Sure, there are some.

So, if we're trying to accomplish two things (get clunkers off the roads and get people to buy new cars), why not have TWO programs? One that encourages people with clunkers to buy a USED car that gets better mileage. And ANOTHER that nudges people who can afford a new car to pull the trigger and actually go buy one.

"Although it's well intended I suspect not much will come of it for the primary reason that people who drive these "clunkers" can't afford new cars."

I think "clunker" is a misnomer. It conjures images of aged muscle cars and rebuilt cadillacs, but the fact is that most used cars are traded in after 3-7 years and lose roughly 50% - 80% of their resale value over that period of time.

"One that encourages people with clunkers to buy a USED car that gets better mileage."

Couple of things: (1) One of the reasons for the program is to encourage car companies to make more fuel efficient cars. If people are swapping around in the wholesale market for cars valued at $2K to $3K, there is no incentive to build a better car; (2) As a general matter, our current stock of used cars won't get better gas mileage than the vehicle traded for them. Sure, a Honda Civic will get better mileage than a Ford Expedition, but people aren't trading in their trucks for civics. The program creators, as I understand it, assumed that new hybrid SUVs would be developed in response to the program, because most truck owners aren't going from truck to Prius. Hence, trading in your '02 Explorer for an '10 hybrid explorer will net you a nice deduction from the sale price.

"And in our consumerist society, people who can afford new cars generally aren't driving around in a car worth that little."

Keep your car for a few years, and it will be worth only a few thousand. I traded in my SUV for a sedan three months ago, and found that my beloved Pathfinder, a car valued at $35,000 in 2001 when it was brand new, was now valued at $4,000. You would be surprised at how quickly cars lose value. I don't think many people realize just how little market value their cars have, and would do well to actually take a look at an NADA book from time to time.

time will tell I guess.

Maybe I'm just a cheap bastard, but I can't fathom tons of people currently driving cars worth that little, to be lining up to take on $400/month car payments. But I guess everyone weighs financial decisions using different criteria.

fins: I believe the 'clunkers' in question will head straight to the crusher. The whole point of the program is to get people to buy new cars. In order to buy news cars they need to take old cars off th road. That's what this program is designed to do.
Of course- this is a very expensive way to go about it. They could have easily just instituted a nationwide smog test. Crush all the cars that fail. That should get rid of old cars in a hurry!

I think that in Japan, to limit the number of old cars on the road, and to discourage those who can't afford decent cars from plopping down $300 for a beater, they make registering cars agregiously expensive so it's not worth it to register old cars.

If we were to charge $1000 per year minimum to register cars, we'd get a lot of beaters off the road.

Personally though, I'm in favor of gas taxes, plain and simple. It strikes at the source of the problem. Drive a ton of miles - you pay. Want to drive a Hummer - fine, but you pay. Own a Winnebago or a 65 Camaro that sits in your garage 364 days out of the year - fine, knock yourself out, you're not hurting anyone.

gee, and they do such a stellar job of paying for their Own clunkers (O'Reilly, Hannity, et al.)!

I totally agree - Fox and Gutfeld and ilk are all really just that - ilk. Or ick. Really can't call what they do "news" in my opinion.

Have serious concerns about "cash for clunkers." For one thing, only new car dealers can do the trade ins. This closes out all the independents - CarMax for instance. How is that fair? The independent dealers haven't asked for any kind of bailouts from the government. Now you're taking their customers - the very people who tend to own those older, gas guzzling cars - and sending them to the new car dealers, who will be very happy to finance them for the big trade-in cash from the government, and turn around and repo them when, as one commenter pointed out, they can't afford the long-term payments of $400 +. I know people love to caricature used car dealers, but there are many reputable independent dealerships out there employing hundreds of thousands of people across the nation. You're hurting one industry in order to bail out another.

But the REAL kicker in my mind is this. I'm sure Obama is eager to sign this legislation because the taxpayers now have a huge stake in GM, and he hopes this will help them sell some vehicles while giving a boost to the environment at the same time. An admirable goal. But GM does not specialize in fuel-efficient cars. Supposedly they have "a dozen models on the market OR IN DEVELOPMENT that get 30 mpg on the highway or better." I can't offhand think of many popular and fuel efficient GM models. But I can think of all kinds of Toyotas and Kias that get great mileage. And in the end, I think those companies will be the beneficiary of cash for clunkers - and though I'm sure they'll be very appreciative of the stimulus, do we really need to be spending tax dollars this way?

In his defense, he may not understand percentages. (Not much of a defense, mind you.)

I think he is bothered by the fact that you need to find something 10 mpg better to get the full benefit when trading in a car and only 5 mpg better when trading in an SUV.

But it sounds like the reward is for percentage improvement rather than absolute change.

Since the SUV was only getting 10 mpg, adding 5 mpg is 50% better. If the car is getting 20 mpg, then adding10 mpg is 50% better. Everybody adding 50% to their fuel efficiency would drop national fuel consumption by 33%.

Put another way... the fuel savings of trading in a 10 mpg SUV for a 25 mpg sedan is better than trading in a 35 mpg sub-compact for a 50 mpg hybrid. (Assuming similar miles traveled per year.)

Really interesting point Michael. Hadn't thought to analyze it that way.

Two quick points. That $400 payment is closer to $600.

Second, people who can afford and qualify for a new car payment are not driving clunkers now so they will get no benefit from the trade in.

Fins,

I must say that is an excellent idea.

More to the point. Greg Gutfeld is not an idiot and as a matter of fact is a very bright and intelligent fellow. His mother is much funnier though. Unfortunately, to most people who do not know much about Mr. Gutfeld they take him seriously when in fact he is an expert in satire along the same lines as Colbert or Stewart....

And if you Sir didn't understand Mr. Gutfeld...then you are worse than Hitler!

(for all of you non Redeye viewers...that is Gutfeld's close to his Gregalog segment)

@fins2theleft--The problem is that cars are registered in individual states. To start charging $1,000 to register a car, you'd either have to convince all 50 states to do that (fat chance) or start registering them on a national level (and we all know how much people like the feds riding roughshod over things that have always been left up to the states).

A huge tax increase on gas most hurts the people who can least afford it. Those old, fuel-inefficient clunkers aren't being driven by folks because they WANT to drive a '92 Pontiac with no muffler. They're being driven by folks that can only afford a $400 car and can only afford liability insurance, not collision. (Buying a new or new-to-you car with payments means you have to have full-collision coverage until its paid off. This usually doubles your insurance premium.) And unlike in tightly-packed Japan, in big parts of the U.S., owning a car IS the only way to get to and from work, get groceries, etc. The poorest of the poor in the cities usually have at least something of a public transit system. The poorest of the poor in rural areas don't have that option.

While I understand the intent, I think the main result of this will be that inexpensive used cars will be taken off the market. Glad I'm not a high school kid in need of a clunker.

Now with the aftermath that's happening on the oil industry, $400 is such a big amount. That's why it's good to know that there were fuel efficient cars these days and most of them belonged to the like of SUVs. On the other hand automotive dealers are now considering efficient autoparts to save money especially for clunkers out there.