My Friend the Car Dealer Says...

This is straight from Business week, which is far kinder in their words at the beginning, but then the numbers speak for themselves....


While the program did its job, its real contribution has been less than the hype. Cash for clunkers did spur sales. It sold 690,000 cars and many were compacts like the Ford Focus and Honda Civic. So it did accomplish the mission of scrapping some old iron and selling some more efficient cars. That said, the boost will amount to less than a 3% increase for the year. That’s hardly the windfall that Germany achieved from a similar program, which pushed sales up an average of 30% a month since March. There may also be a hangover in car sales in the U.S. Edmunds says that purchase intent is now down 11% from June, meaning that fewer people are looking at new cars. So sales could slump in the coming months. In fact, J.D. Power says that more than 70% of sales may have happened later this year even if the government hadn’t spent $3 billion on the clunker program. One other point: Toyota was the biggest beneficiary, getting 19.4% of sales, with General Motors getting 17.6% and Ford getting 14.4% of sales from the program.

A whole lot of money and wasted motion and paperwork for very little return.....

That's the govt. at work. One of the reasons why the govt getting into any business is unconstitutional.

I tend to think that the true motivation in implementing this program was as a political pay-off to the UAW.

Why not cash for old appliances for newer more energy efficient models?

Or cash for analog TVs for HD?
Wavels



“It was probably, in the end, a complete waste of taxpayer money,’’ said John Wolkonowicz, a senior auto analyst at IHS Global Insight, Lexington forecasting firm. “The dealers, who were supposed to be the primary beneficiaries, many were forced into cash flow problems because the government didn’t pay them in a timely fashion.’’
From the outset, there were problems with the Car Allowance Rebate System. It was supposed to start July 1 but was delayed until July 24. The rules were complicated, and the list of qualifying vehicles and other requirements changed repeatedly. And in addition to the formidable paperwork, the government website set up to process the deals kept crashing, creating a backlog

Excerpted from:http://www.boston.com/business/articles/2009/09/19/car_showrooms_quiet_after_clunkers_clamor_ends/?p1=Well_MostPop_Emailed7

Going from a 15 mpg car to a 20 mpg car is allowed but going from a 23 mpg car to a 35 mpg car is not. Maybe there is a formula that proves me wrong that I don't know about.
When this was brought up I wonder what the justification was to not allow it?

here we go again,

I saw a whole bunch of "probably"s "maybe"s and "could be"s.... assumptions.... assumptions made by people with biased ideals and special interests.... give me real facts, not opinions...

the program did not work out as smoothly as planned, that is a given fact, i am not doubting that, but that is due to there is a LEARNING curve to complete when starting a new program or project. it did not run "smoothly" because it was so short, and the mentioning of it running a lot smoother in Germany is because that country isn't afraid to let government help business out, unlike america, that has the idea that government and businesses cannot cooperate and cannot work together, they probably embraced the program, because both sides of the isle understood the gravity of the situation and created a better program, which has been running for months apparently..... .... p.s. if the program would've run longer the process would run smoother...

even with what JD Edwards says, 70% of sales MAY have happened... even if this "MAY" is true, it still confirms that car sales actually went up for the WHOLE YEAR than what "may" have happened if the program wouldn't have been adopted. They fail to mention what I said earlier, that even though dealers were facing cash flow problems because the process was slow and imperfect, they are now able to manage the period of very low demand better.

let me say that again: EVEN THOUGH THE PROCESS WAS IMPERFECT, AND THERE WERE FLAWS IN IT'S EXECUTION, THE FACT THAT DEALERS HAVE MORE CASH WILL LET THEM MANAGE/PLAN/MANEUVER THE PERIOD OF LOW DEMAND BETTER. THAT IS NOT POSSIBLE WHEN YOU HAVE NO OPTIONS BECAUSE YOU HAVE NO MONEY. THAT IS ONE OF THE THINGS YOU FIRST LEARN IN COST ACCOUNTING. YOU BUDGET ACCORDING TO YOUR RESOURCES. YOU DO NOT DETERMINE A BUDGET, TO THEN SEE IF YOU HAVE THE RESOURCES. YOU LOOK AT YOUR RESOURCES, THEN ALLOCATE THEM ACCORDING TO YOUR NEEDS. WHEN A BUSINESS HAS LITTLE OR NO CASH IT'S OPTIONS ARE VERY VERY VERY LIMITED.

stop giving me biased opinions from conservatives... i WILL prove them wrong.

if you want me to keep repeating it: Toyota did a better job identifying the needs of it's target consumers and actually meeting them. That is not the government's fault. stop mentioning it like if it was the government's doing that GM and Crysler did not sell as many cars as Toyota because it is not the US government's fault Toyota was doing a better job at creating and keeping a happy client base. it has nothing to do with the CARS program or the current government. stop believing the propaganda. THANK YOU..

It's not conservative economics... it's just economics. The jury is in.... it was a flop and a waste of taxpayer money. It was a union helping hand at our expense. Obama keeps granting the agenda of the unions and the USA keeps losing jobs because of it.

One of the reasons why the genius founding fathers knew better than to let govt. be in charge of businesses. It all ends up in cronyism and a bloated tax bill later for the average citizen who benefited NOT at all.

you are wrong. there are different forms of viewing economic principles. the fact that you do not know that doesn't mean anything.

there is no: economics is just economics, it's crystal clear. it doesn't happen, you know why? it is a SOCIAL SCIENCE. It is not a mathematical discipline such as linear algebra, or differential equations, or physics, or fluid dynamics. There are differing points of view on any given subject. it is not a 1+1=2 discipline. There are numerous models, that explain similar phenomena, that are sometimes proven to be wrong, and most are hotly contested and debated without any real conclusion. There is no crystal clear in economics, if you believe that you are very VERY mistaken.

Or is it just that if ONE economist and two or three interest groups calls the program a failure, and the fact that you agree with him automatically make their assertions correct?? Didn't think so...

The ONLY form of economists that can say anything positive about "cash for clunkers" are Keysnians.

This group of econmists have one shortfall which impales them every time. They have no real world successful models to emphasize as proof of their interpretation of Economics.

It's quaint, but ineffective. Keynes was an interesting fellow, but he never nailed his life's work down. Not surprising since the entire theorem only works on paper and static events.

No, for most economists who live in the real world... Cash for Clunkers was not a success. It failed to produce measurable results, only marginal. Not good enough to spend other ppl's money for. Certainly not good enough to go against the constitution.

lets 'measure'... time for another lesson in FINANCE people... put your thinking caps on....

since YOU assume that measuring is impossible, let me prove you wrong.

it is not difficult,

annual savings is agreed at 733 million, let's agree that each person received 800 dollars from CARS, lets also assume only 690K ppl used the program (for ease of calculation), that's 522,000,000 or 522 MIL. is that understood?? ok, lets place the interest rate at 5%.

let's find the future value of the 522 million ppl got back from the program:

I = 5%
N= 8 (the number of compounding periods = number of years, we are compounding once annually)
PV = 522,000,000

The future Value = 777,763,716 and change.

NOW,

Let's find the Value of the Annuity:

PMT = 733 (annual gas savings)
I = 5%
N= 8 (we will compound once a year, for simplicity's sake, so number of periods = number of years)

FV = 6999496805

Now let's add the two together, so we can get the future value in 8 years at 5% interest of the gas savings + the cash ppl got back from the program:

777,763,716 + 6,999,496,805 =7,777,260,521.

Now, let's discount that number at 5%, once a year again, to see what happens....

FV = 7,777,260,521
I = 5%
N= 8

PV = 5,219,747,212.

Ok, let's discuss the above situation.

3 billion dollars were invested, correct? Those 3 billion dollars generated immediate cash flows of 522million, and an annual cash flow of 733 million for eight years. Using a constant interest rate of 5%, which we compounded annually we found that the future value of the immediate cashflows combined with the expected cash flows for the following 8 years totaled 7,777,260,521. To determine if the investment is worth it we must find the Present Value of the preceding amount, to find out if spending 3 billion dollars is worth it. If the present value is less than 3 billion dollars, we are wasting money and the investment is pointless. If the amount is greater than 3 billion dollars we go ahead with the investment, since it is a good idea, and will generate positive cash flows.

Since the present value of the immediate cash flow plus the present value of the expected annual cash flow is 5,219,747,212; and that amount is greater than three billion dollars, it is recommended that you make the investment, because you will be generating a profit of 2.2 billion dollars.

If that's not "measured", you my friend, are one stubborn individual.....

dawg that confused the shit out of me

jewfr00 said:

dawg that confused the shit out of me

Click to expand...

jaja

Because its nonsense.

He thinks the govt. taking 4500 from one taxpayer and giving it to the car buyer is somehow saving money.

Of course it doesn't make sense.

you my friend, are one difficult individual. it's not nonesense. it's not saving money. its INVESTING money. two different things.

it's the government releasing 3 billion dollars and the cash flows that investment will generate is equal to 5.2 billion dollars. and that's assuming that the 733 million annual savings by americans will cease in 8 years, we know that is not true.

you seem to condemn government investment in it's people to spur economic activity, if you forgot: that is common practice in the economy. there is nothing unusual about it, and it is possible (i just showed you) to calculate how it happens. read my post again. run the numbers, get yourself a calculator and start clacking away... you too will realize the truth....

It's investing taxpayer money. There's the difference. Non efficiency, a common malady of govt enterprise.

Stealing from Peter to pay Paul is not getting us anywhere.

The immediate sales slump shows that much.... sales compression... followed by low sales.

If this methodology actually worked the Soviet Union never would have collapsed. The EU would have high GDP's.... etc. etc.

Like I said Keysnian economics looks great ... on paper. It doesn't work in the real world.

Massachusetts health care is a perfect example. failure....

Must be scrapped within 6 months

Ok, wow. Hate to jump into a 2 man debate, but I might, but I'll ask a question first:
Does anyone know what the Number one "Clunker" being traded in is?

America has a lot fewer functioning Ford Explorers these days.

The number one vehicle destroyed under the Cash for Clunkers program, the Transportation Department says, was the Ford Explorer (1998 edition). Number two, the Ford Explorer (1997). Number Three...you guessed it. The '96 model.

The top eight, Jalopnik reports, were all SUVs. In fact, they were all various editions of the Ford Explorer and Jeep Grand Cherokee. A pair of late ‘90s minivans, the ‘97 Ford Windstar and '99 Dodge Grand Caravan, round out the top ten. All ten were domestic vehicles.

Domestics were dumped and Toyotas were the biggest sellers.... sort of a clue.

CrackerJax said:

It's investing taxpayer money. There's the difference. Non efficiency, a common malady of govt enterprise.

Stealing from Peter to pay Paul is not getting us anywhere.

The immediate sales slump shows that much.... sales compression... followed by low sales.

If this methodology actually worked the Soviet Union never would have collapsed. The EU would have high GDP's.... etc. etc.

Like I said Keysnian economics looks great ... on paper. It doesn't work in the real world.

Massachusetts health care is a perfect example. failure....

Click to expand...

it's not stealing from peter to pay paul.

the immediate sales slump, there was a sales slump before the program. the program is not meant to fix the economy. the economy can only fix itself. the program is meant to help dealers and automakers weather the storm.

it's an investment by the government in private industry to help the economy. if you know about history, you can remember that after WWI there was a depression. then there was WWII, in order to avoid a second depression when demand sharply dropped when the war ended... what did the government do?? if you do not remember, they invested heavily to spur demand... and guess what? it worked.....

again:

it is not the government's fault that Foreign automakers were more successful at identifying what the American consumer wants to buy. it is their own fault. It is also American automaker's own fault that they were producing vehicles that lacked in design and quality behind it's foreign competition. stop talking about it like if it is some sort of government-japanese automaker super-conspiracy....

redivider said:

it's not stealing from peter to pay paul.

the immediate sales slump, there was a sales slump before the program. the program is not meant to fix the economy. the economy can only fix itself. the program is meant to help dealers and automakers weather the storm.

it's an investment by the government in private industry to help the economy. if you know about history, you can remember that after WWI there was a depression. then there was WWII, in order to avoid a second depression when demand sharply dropped when the war ended... what did the government do?? if you do not remember, they invested heavily to spur demand... and guess what? it worked.....

Click to expand...

After WW1 ended the government got us out of the the mini depression of 1921 by lowering taxes and cutting government spending over the next two years, Unemployment went from 11.7 in 1921 to 2.4 in 1923.
The reason for the prolonged depression was government interference on fixing wages and prices in certain industries. That segment enjoyed a 25 percent increase which was enough to cover the 23 percent increase in goods. The majority of us citizens were left out in the cold.

redivider said:

it's an investment by the government in private industry to help the economy. if you know about history, you can remember that after WWI there was a depression. then there was WWII, in order to avoid a second depression when demand sharply dropped when the war ended... what did the government do?? if you do not remember, they invested heavily to spur demand... and guess what? it worked.....

Click to expand...

ummm, no. The reason the USA became so damned economically powerful was due to the fact that every other nation that had any manufacturing ability got the fucking shit blown out of it. The USA was about the only large industrial nation that had lots of resources and 80% of the worlds wealth. ( The USA after WW2 held 80% of the worlds gold, that Fort Knox thing you know?) and had infrastructure and a workforce that was already trained. Everybody bought everything from the good ole USA. We don't make too much anymore besides crappy cars, and we aren't really making those either.