Cash for Clunkers Cars Program: Boon or Boondoggle?

A dealer could be left holding a meaningless voucher if, for example, the car traded in wasn't on the list of eligible vehicles or in one instance at Bennett's dealership, "The claim was rejected because the customer didn't keep the vehicle insured for the entire year, therefore, no claim, no money," he said.

There should have been a pre-qualifying procedure that told you if all qualifications were being met at the time of the trade. "Why not tie it all in to the proper databases, and let the system check for insurance coverage, length of registration, etc? That way, if it doesn't pass, you find out before the deal is booked, and not after the fact," says Bennett.

Furthermore, some believe the program didn't go far enough. "It did not include monies for the purchase of a used car. There are many makes and models of used vehicles that would have provided similar benefits in overall fuel efficiency," says Larry Gamache, communications director for Carfax, which provides vehicle history reports. "More importantly, including used cars would have allowed far more cash-strapped, credit-crunched Americans the opportunity to acquire a new vehicle with similar stimulative effects on local economies," he adds.

While the majority of participants financed the vehicle they purchased, some 20 percent got lease deals -- a little more than 100,000 leases were written during the program. But the program required leases of at least five years.

LeaseTrader.com reports a significant trend in people that leased a car with a Cash for Clunkers rebate looking to escape the auto lease just one year into their five-year commitment. "It's difficult for these people to exit their lease because there is very little market for a used car with three or four years left [on the lease]," said Sergio Stiberman, CEO and founder of LeaseTrader.com, in a prepared statement. "Many of these people didn't have a car payment when they took advantage of the rebate. Now they have a monthly payment and five-year commitment, which is extremely unfavorable in a leasing environment."

Leasing isn't for everyone. There are mileage limitations. Leasing can also cost you more than an equivalent loan because of higher finance charges built into the monthly payment. Then too, if you don't keep the vehicle in mint condition, you'll have to pay excess wear-and-tear charges when you return it.

Change your mind and try to get out of the lease early and you could be stuck with termination fees and penalties that you have to immediately pony up. This could equal the amount it would cost had you stuck with the lease for the original term.

But mostly, the rearview mirror look at Cash for Clunkers is a good reflection -- at least for consumers if not the U.S. Treasury.

"I traded my 14 year-old Ford Winstar. I got $5,000 off the purchase price of a new Honda Civic. My old car wasn't even worth $1,000," says Dawn McKenzie. "I got a great deal and probably wouldn't have gotten a new car had it not been for this program."

Similarly, Joyce Scardina Becker and her husband chucked their 1989 Ford Bronco, nicknamed "the beast.". It had 140,000 miles, was dying and cost $75 per fill up.

"Cash for Clunkers was the answer to our prayers," says Scardina Becker. "We could have never sold the 'Bronkie' to anyone, there were too many things wrong with it. We used the $4,000 on trade-in and bought a Ford Escape. We never looked back. Thank you Obama."

-- This embed didnt make it to copy for story id = 11412190. -- This embed didnt make it to copy for story id = 11412190.
Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...