Car Sale Stimulus Too Complicated And Too Successful

Last Updated Jul 31, 2009 5:59 AM EDT

As part of a plan to both stimulate the economy and auto sales the U.S. Government came up with "Cash for Clunkers". This program actually called Car Allowance Rebate System (CARS) was to pay a rebate of either $3,500 or $4,500 to people buying a new car that exceeded the mileage of an older one that had to be traded in. The idea was that people would trade in their old inefficient cars for new ones that would use less gas. Dealers would get sales, manufacturers would build more cars and the environment would benefit.

The official website may be found here. The idea was that the dealer would process the paperwork to get the money after applying it to the deal. The program proved to be so successful that the government announced that it was suspending it tonight as the funds allocated to it had pretty much been used up.

The plan as the Government is wont to due ended up being very complicated for both the customer and the dealer. Only certain cars would qualify and the list changed abruptly a few days into the program which caused some deals to fall through. It also was not made clear that the dealer to get the money had to disable the car at their dealership by destroying the engine. This was to make sure that the car was taken out of circulation and not resold. Some dealers had to go get the cars back from where they had shipped them to do this.

Much like the voucher to buy a conversion box for your old analog television the program has turned out to not be funded to meet demand. More money may needed to be added just to close out the sales currently being processed. To be honest this program will not do a great deal to make the economy or the environment better and it ads to the total spending and debt of the U.S. If more money is added to the program this will only increase this issue. It might make sense to reprogram some of the stimulus funds to keep this program afloat before increasing total spending.

Considering that the U.S. Government is working with GM and Chrysler to close thousand of dealerships across the country with resultant job loss it seems somewhat silly to have a program propping up car sales with the idea that it might save some jobs. The program is also not limited to U.S. vehicles so foriegn models may be bought. Since the place of manufacturing of cars is now all mixed up with Hondas and Mercedes made in Alabama and GM cars in Canada and Mexico the total effect on the U.S may not be much in the end.

Another sort of good idea gone bad through poor set up and management.

  • Matthew Potter

    Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.