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Cash For Clunkers Program Will Cost The Poor Their Cars

By: Steve Johnson

8/10/2009 - 35 Comments

On Friday, President Obama signed a bill extending the cash-for-clunkers program with another $2 billion.

The program is working in sending thousands of people to dealers to trade in their old vehicles and purchase new ones, but the short term boost in auto sales will be followed by long term price increases.

As the unemployment rate is likely to reach 10% later this year, many families will be looking for cheaper vehicles.  Used vehicles that are priced below $5000 will be in high demand, but the clunker program is distroying these vehicles.  The clunker program demands that all cars traded in must all be crushed.

This is just the opposite of what the economy needs right now. We need more cars under $5000 and less debt from the purchasing of newer cars. The government is actively interfering with capitalism in an unsafe manner that will result is less wealth - as affordable cars are crushed.

The clunkers program is removing these cars from the market and soon there will be no used cars under $5000.   That means that the wealthier class that can afford the payments of a newer vehicle will be able to take advantage of the clunker program and trade in their car for a new one, while the lower income families that need a used vehicle will be priced out of the market.

The poor families that Obama claims to be helping are the target of this program, they will suffer the most.

The recession has reduced the middle class to the low class, which means the average family will no longer be able to afford to own a vehicle. This program is simply speeding up the process of lowering our standard of living.

Inflation

The used car market has already increased 5% this year and with the clunker program is expected to increase another 10%.  Who can afford a 15% increase in the cost of used vehicles in the middle of a deep recession?

Then there are the dealers that cater to low income buyers. These dealers will no longer be able to find cheap used cars and they cannot compete with the larger dealers that sell new cars, so they are trapped in a shrinking market. 

Many dealers that cater to low income buyers will be run out of business, while the big dealers are rolling in money from the clunker program.

At first glance, this program looks like it is going to help a lot of people get new vehicles, but the result is going to be a disaster.

In a few years, the results of the clunker program will show that fewer people can afford vehicles as the prices of both used and new vehicle continues to climb.  The results of this program leaves you with few option. 

If you are planning to purchase a vehicle anytime in the next few years, you almost have to do it now before prices increase anymore.  The clunker program is going to so distort the market that the longer you wait; the more you are going to have to pay.

But if you don’t have the money than don’t purchase a vehicle and realize that you probably won’t be able to purchase in the future.  The average family will be lucky to be driving the clunkers they have today for the next ten years.

This is just another example of how government intervention in the economy only creates a bigger mess than the last one they created with low interest rates and easy credit.

Here is a video from Ron Paul about the clunker program and how the poor will suffer the most.

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