Saturday, June 20, 2009

Cash For Clunkers

Our family is not well known in automobile showrooms. We tend to buy sturdy cars and drive them for decades. My wife's Omaha car is typical. A 1999 Lexus RX300 with 95,000 miles.
It runs like a champ and hasn't had any mechanical problems.

Still, its ten years old and she was contemplating a change even though car ownership in Nebraska is punitive as autos are taxed annually as property. So, if you buy a Mercedes you have the equivalent of an out of the way lake house. The "Cash for Clunkers" proposal and its $4500 tax credit was a possible way to take the sting out of Nebraska property taxes.

The Clunker bill showed up as part of a war funding package Friday and it is like most legislation: worthless. The Clunker has to get less than a 18MPG city/highway rating to qualify and then you must purchase a vehicle that gets 2MPG better mileage. The Lexus doesn't qualify as it is rated as more gas friendly than a Clunker. So ten year old SUVs cannot be taken off the road with this wonderful sounding piece of legislation.

What will qualify? Evidently older cars and trucks. Since most people don't start with a Lexus quality car, the drivers of 10+ year old vehicles are probably the second, third, or fourth owners of these cars. My assumption is that with our new, tighter credit standards they will not come close to qualifying for a car loan on a new car. Unless the government strongarms GMAC, Citi, and Bank of America into making those loans to the uncreditworthy. I wouldn't put it past them.

The success of this legislation will be marginal at best. Not many new cars will be sold as a result. Our leaders in Washington will pound their chests and tout the benefits to the economy, the auto industry, and our environment, but it is just another instance of looking like progress rather than progressing.

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