The Real Benefits of Cash-for-Clunkers

The cash-for-clunkers program is widely popular, but it’s easy to negatively spin this program. Opponents claim this programs pays people $4500 to destroy functional cars. That’s what the GOP senators see, and it’s why they are in opposition to this program. If that’s all this program did, then I would agree with them. But there are far more aspects of this program that are ignored that make it extremely beneficial to our economy.

For starters, the government pays $4500 for a functional car. This car then gets sold to the highest bidder for scrap/parts/recycling. Though not very often, sometimes the value of the parts are worth more than this. The point is, it’s not just $4500 being destroyed, it’s maybe a couple hundred.

Several things happen once the car is exchanged:

-Older cars, which are usually less safe than new cars due to evolving standards of safety, are brought off the road. This lowers insurance premiums and lowers medical cost averages.

-It increases the demand for new cars. That may sound like a “bailout for car companies”, but those car companies employ a lot of people, and employment is s really what’s needed to stimulate the economy.

-It increases the stock value of bellwether companies, which brings the stock exchange higher. When this happens, everyone wins. Companies begin hiring, consumer confidence goes up, people start spending again

-It brings down emission. This fact is the only one that really gets talked about in the news, which is why this program is such an easy target. After all, $4500 a car is a rather expensive way of dealing with improving emissions by 4 miles a gallon. Obviously if this is all the program was about,it wouldn’t fly

-Although it won’t cause a large stir, lowering gas consumption does improve supply, which brings down the costs. I don’t think this will be a large or maybe even noticeable difference, but it does contribute.

-This program increases consumer confidence. Since America’s market is about 70-ish percent consumer based, consumer confidence is a huge hurdle that needs to be breached before the economy can improve

-The cars that were traded in are parted, which allows for cheaper maintenance of cars on the road. Not only does this benefit private drivers, but it helps government costs as well. The government pays around $0.52 per mile after gas and maintenance is considered. This is all minor in my opinion, but worth mentioning anyway. If even a penny of that is eliminated, then the daily totals for moving around a million-car fleet (any government car from postal drivers to parking enforcement) is drastically reduced.

All of these benefits are afforded at the cost of a few hundred dollars per trade-in