Tuesday, August 04, 2009

$4500 Cash for Clunkers causes $5000 loss for businessman

The law of unintended consequences is alive and well when it comes to the Cash for Clunkers program.

Auto parts dealers and scrap yards are required to destroy the cars turned in under the program. They have to 'freeze' the engine and crush the cars - many of which are in pretty good shape, as this video from WSPD shows:

Clunkers Program Not Good for All, Junk Dealers Say

Scrap Yards Call it a Waste of Money
By WSPD's Aaron Brilbeck

While the government and local car dealers are hailing the "Cash for Clunkers" program as a success--some local scrap-yards are calling it a huge waste of money. At Nationwide Autoparts in South Toledo, owner Zyad Humos stands next to a Mercury S-U-V that looks practically brand new, and shakes his head in disgust as he's about to crush a 1999 Lincoln that doesn't look like a clunker.

The program requires Humos to destroy the vehicles, but he says if he sold the Lincoln for parts, he could easily get $6,000 for it. And, he says, in the past week he's crushed about two dozen cars in similar shape

So the government borrows billions to give $4,500 to dealers for certain cars to be turned in and destroyed, and the aftermarket - used car dealers and auto parts suppliers - is losing money ... more money than the rebate.

So if the overall long-term loss of money from the market is much greater than the temporary rebate, how does this 'stimulate' the economy?

And idiots in Washington think this is such a good a idea that they want to put another $2 billion toward it? Insanity!

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