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September 25, 2009

Cash For Clunkers not such a great deal after all?

Filed under: News Review, Personal Finance — Tags: , , , — thebalancedspreadsheet @ 12:37 pm

William Jeanes wrote an amusing but thought provoking article on AOL Autos titled “Cash for Clunkers Buyers suffer Buyer’s Remorse, won’t save fuel”.  It is based on research done by CNW Research of Bandon, Oregon.  I wholly recommend reading the full article, but here are some of the highlights from it:

“more than 17 percent now harbor “some” doubt or “serious” doubt about letting a government subsidy convince them to go further into debt.”

“The significant revelation of the CNW survey, however, is that under normal conditions only 6 to 8 percent of new-car buyers suffer the shouldn’t-a-done-that syndrome.”


“The actual C4C numbers were an average loan length of 49 months and an average payment of $317”

That is a total payment of $15,533

“CNW surveyed drivers involved in the purchase of the first 239,000 C4C vehicles. The average intended annual mileage was 10,894, up from the actual clunker mileage of 6,162. For those of you without a calculator falling readily to hand, that’s nearly double.

But what about that miles-per-gallon improvement we were promised? Well, we got it. The average fuel economy reported by C4C buyers rose from 16.3 mpg for Old Dobbin to 24.8 for the new carriage.”

That is about 61 extra gallons a year by my calculations.  Meaning consumers will pay about $130-$150 more in gasoline a year.  So people are going into debt over $15K on average to pay more in gas each year?

“Three revealing line items in a separate CNW survey noted that the drain on the family coffers would be offset by reducing the pay-down of credit card debt, deferring home improvement and removing money from non-targeted savings.”

Double Yikes!

As always there are two sides of every story.  Dave Ramsey as always has an entertaining review on his website.  It hit me though when reading this article that I do not think our country really has not learned anything from this recent recession.  Going into more debt at the sacrifice of savings and paying down existing debt is not the way to go long term.

Anybody else have any thoughts on this issue?


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