Cash for Clunkers…is it sustainable?

Without a doubt, the new cash for clunkers, officially known as CARS (Car Allowance Rebate System), is a huge success. After a week or so, the $1 billion program is close to running out of funding. On Monday, Congress passed a $2 billion extension on the program, making it one of the fastest approvals in history. The programs has been tabbed as a jumpstart to the economy with an underlying goal of decreasing carbon emissions, but will it meet expectations or is just a way for consumers to get a better trade in value?

Stats on the program are scarce, mainly because of its infancy, but for the $1 billion to have already been used, that means 225,000 cars have been traded in.

What is the program and how does it help? The CARS program helps consumers buy or lease a more environmentally-friendly vehicle. The program is designed to energize the economy, boost auto sales, and put safer, cleaner, more fuel-efficient cars on the nation’s roads. Consumers will be able to take advantage of this program and receive a $3500-$4500 discount from the car dealer when they trade in their old vehicle and purchase or lease a new one.

While there is no doubt that this program will help consumers drive off the lot with a shiny new environmentally-friendly vehicle, what is the real economic benefit? Obviously the main beneficiaries are the car companies. While it would be all well and great of the Big Three were reaping the benefits, unfortunately they are still behind the times when it comes to manufacturing these vehicles (although Ford has started to show some life), which means most of the money is still going overseas to proven manufacturers like Toyota and Honda. It may help these manufacturers in the short term, but what about the long term? How is that helping our economy?

The other issue I have with this program is that it is technically doubling the number of cars that exist. Dealers in this program are required to junk the vehicle after it has been traded in and a certificate proving this must be provided. Even though those cars won’t be on the road, they are still on this planet, going to junkyards and filling up landfills. How is that environmentally responsible?

While this program is great for consumers looking to upgrade to a better car (even though it is hard to determine if your car is eligible), it is not a sustainable program over the long term. There is a lot of good that can come out of this program immediately, but what about the long term? Where will we be when the money runs out?  

Posted by: Lauren

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