09/07/09 Tampa Bay, Florida
Roger Wiegand of Trader Tracks Newsletter finally says what I always figured: “Cash for Clunkers was a real clunker. One out of four auto buyers using this program is having buyer’s remorse as they just signed-up for so many new payments they cannot afford.”
Thanks, Roger! I always had a hard time believing in the unbelievable “Cash for Clunkers” program, where the government astonishingly gives up to $4,500 to people who buy a new car!
This is a subject which is very interesting to me because I happen to be a guy who owned a whole series of clunker cars and trucks over the years because I couldn’t justify the expense of a new vehicle/a good vehicle/a better vehicle/a vehicle that wasn’t rusted/a vehicle where parts and pieces didn’t fall off/a vehicle that usually started because they were completely paid for, thus costing me exactly nothing per month in principal and interest payments, and which needed only the legally-required minimum of liability insurance.
In short, the cost of driving those old cars and trucks was almost zilch, which fitted my budget perfectly, as I thought I would need the extra money for dating, but which turned out not to be the case. In fact, I found that women usually disdained both me and my cars, and they would say hurtful things like, “Hey! It stinks in here! Or is that you?” and, “At least clean out the old, moldy pizza boxes and chicken bones so I won’t be more disgusted than I am just sitting next to you!” and yammer yammer yammer.
That is, however, when I learned one of the Immortal Lessons Of The Mogambo (ILOTM), which is that as long as you had a good set of brakes on your ratty old car, a case of cheap oil in the trunk, a long siphon hose and a girlfriend who had a nice car in which to ride around, you could get along pretty good!
Not “getting along” as good as the federal government, however, which can (and did) just decide on a plan to sell a couple of trillions of dollars in new debt, whereupon the Federal Reserve will create the money, like when the Fed bought $30 billion of US government securities, directly increasing the money supply by the amount of the new debt! Now THAT’S what I call “getting along pretty good!” Hahaha!
Now, suddenly, sad sack people like me, whose incomes are so low that we have to drive rusted-out, beat-up old clunkers that cost almost nothing to own or operate, that nobody would steal, which were completely paid for, for which you only needed the minimum of liability insurance, would suddenly decide to buy a very expensive, shiny new car and begin paying upwards of $400-$500 a month for the new car and the big new premiums for the required higher insurance coverage? Hmmmm!
Perhaps this is why Bloomberg reports that “Consumer spending in the US rose in July as Americans jammed auto showrooms to take advantage of the ‘cash for clunkers’ program while avoiding other purchases”! Yikes! Avoiding other purchases! This is NOT the kind of thing from which economic recoveries are made!
And to suddenly start paying all of that money, every month for the next seven years or so, is not to even mention the effort of always having to wash and wax the new car, which is hard, disagreeable work that you don’t get paid for, which is like being punished for having a new car!
So, the only explanation that makes sense is that since people can stop paying on their house but still live in it because the bank doesn’t want to evict them, people will start living in their cars and stop paying on them, too! What are the car companies going to do? Evict a family onto the street by repossessing the snazzy new car in which they are living? Hahahaha!
I say this because I read in The Financial Times that in the UK, “The number of people of working age living in a household where none of the adults work rose by 500,000 to 4.8m for the period April to June”, which is a huge number of people which is now “close to one in five households”, which I assume is a rough estimate of what is happening in the USA.
Instead of laughing in my usual mocking style to indicate the bizarre absurdity of an economic system where the unemployed are given financial incentives to buy new cars, let me instead merely urge you to buy gold, silver and oil with your every waking moment and your every last dime, whichever comes first, which says the same thing but with the “secret bonus feature” of letting you make a Whole Lot Of Money (WLOM) when their prices rise, rise, rise, which is good because you are going to need a WLOM when inflation in consumer prices catches up with the inflation in the money supply that will accommodate the inflation in government spending, thanks to the loathsome Federal Reserve allowing and abetting the inflations by merely creating more money, which makes buying gold, silver and oil such an obvious choice that you say, “Whee! This investing stuff is easy!”
Until next time,
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
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“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” -Sir Winston Churchill
I suspected that cash for clunkers would cause people to take on too much debt…because $4K is only a fraction of what a newer car costs–plus, as you mention the higher insurance premium.
Not only won’t 4500 bucks cover but a small fraction of the cost of the new car, but now you are required to have full coverage insurance because of the loan. Next rude awakening will be the cost of the license plates, especially in states like Az., where it is based on the value and year of the vehicle, and it ain’t cheap. Yep, these people will have to live in the cars because it will either be make the rent or the car payment, but not both.
Living in the car at least makes one a moving target; harder for the gubmint to find!
Sage; “Living in the car at least makes one a moving target; harder for the gubmint to find!”
The Who; ” I’m an air-conditioned gypsy. Watch the po-lice and the tax man miss me. I’m mobile”!
…are the gypsies shovel ready for the underground economy isn’t all that…these days who rests eternally with their gold teeth in…and there best jewels on…well…you can always be an itinerant knife sharpener with your office in the trunk…
at least ,by living in your new shiney clunker,you wont have to change out of your jammies to go see your farts and air selling stock broker
Plus they tax the $4,500. Ha ha ha ha. Morons.
I’m going to kick back and watch a few more episodes of Operation Repo on the old TV. Maybe by next year I can trade in my empty beer bottles stacked up around me. Dig up some of that shiny metal out of that big lot with the fence around it. Take it down to the auction and pick up one of those slightly used automobiles & still have some cash left for a couple air fresheners.
We’ve seen many statistics on the cash for clunkers programs touting how many cars were sold and how much more fuel efficient they are. I haven’t seen any stats on how much money was lost by auto repair shops, parts stores, used car dealers and car donation charities.
Yes, it seems the solution for irresponsible spending is more irresponsible spending.
I know a lot of people are concerned/confused about car repossession. I created this infographic that helps explain the process:
http://www.clearbankruptcy.com/blog/repossession-infographic/
Feel free to use it on your site if you like. (I’d appreciate a link for credit if you do.)
“Ninety-five percent of the people in the world are idiots, and I am in grave danger of contamination.” – Horace van der Gelder.
@SimulationTraining The purpose of taxation has never been to make the nation prosperous, so the whole quote is meaningless. Taxation spreads out risks and costs out among a large population. It keeps the disabled from starving to death, builds our roads, provides for defense from enemines, regulations preventing corporations from polluting our land, air, and water, education for all, and many other things, which you gladly take advantage of every day you live in this country.
Of course taxation doesn’t make us profitable, it does make living in a society with lots of other people a lot more comfortable, for everyone (including the top .1% who would probably be slaughtered by the poor if the poor were forced to choose between that and starving to death).
How long do we have to get our larders stocked? Or trunks as the case may be.
How much food should we put by?
I didn’t see one word in this article that provides and substantive proof that one in four people who bought a vehicle through the cash for clunkers program has had buyer’s remorse. The author of this article just cites another article as a reference, but the author of the referenced article just makes the statement without any corroborating evidence to support it. He might as well say the moon is made out of cheese. These people are just trading on the fear and angst of the times for their own benefit, and to the detriment of everyone else. The sooner the public begins to turn their backs on those in the media who exploit society’s problems for their own gain (ratings = money) the sooner positive change will take root.