Your Letter: Some numbers on Cash for Clunkers
Do you think the cash for clunkers was a good idea for the consumers? Think again.
If you traded in a clunker worth $3,500, you got $4,500 off the purchase of a new car for an apparent savings of $1,000. However you have to pay taxes on the $4,500 come April 15 (something no auto dealer mentioned). If you are in the 30 percent tax bracket, that's $1,350. So, rather than save $1,000 you actually pay an extra $350 to the feds. Now, you traded in a car that was most likely paid for and you now have 4 or 5 years of payments on a car that you did not need.
But wait, it gets better. You also got ripped off by the dealer. For example, every dealer in the metro area was selling the Ford Focus with all the extras on it for $12,500 the month before the cash for clunkers program started. When the program started they stopped discounting them and sold them at the list price of $15,500. So you paid $3,000 more than you would have a month earlier. (Honda, Toyota, and Kia did the same thing as Ford and Chevy.) So what's the final tally. You traded in a car worth $3,500, you got a $4,500 discount, net gain $1,000, but you paid $1,350 in taxes, net loss of $350, and you paid $3,000 more for the car than you would have a month earlier. Net loss of $3,350. We could add the additional taxes on that extra $3,000 you paid for the car along with five years of interest but let's stop there.
So who actually made out on the deal? The fed collected taxes on the car along with taxes on the $4,500 they "gave" you. The car dealers made an extra $3,000 or more on every car they sold along with kickbacks from the manufactures and loan companies. The dealers/manufactures got to dump a lot of cars that they couldn't give away a month earlier, and the poor stupid customer got saddled with even more debt that they can't afford.
Think this was stupid for those crazy enough to swallow this wonderful scheme? Just wait until we get health care reform with no additional costs over what most of us now pay for health insurance and the best medical care in the world.
Do you think that this scheme (healthcare reform) might have been designed by the same people who came up with the Cash for Clunkers program? Just a little food for thought.