Cash For Clunkers - Mortgage Mess Part Deux?
The Cash for Clunkers deal has been so successful that the government has had to temporarily suspend the program. The "stimulus" package gives you or me $3500-4500 depending on your trade in for a more fuel efficient car.
Dealerships have said it has been a great success - except for the government being behind in paying. Sound familiar? It's the same problem doctors have when getting their Medicaid payments. Plus, this $1 billion program is going to cost more than first thought. Just like every other government program ever created.
Here's where I see a problem.
I went to Ford.com and used their calculator to figure out what I would get for my 2000 Ford Ranger "clunker". I picked a 2009 Ford Ranger to upgrade to with a V6 instead of a 4 cylinder which gave me a voucher for $3500 instead of $4500. The bare basic 2009 Ranger is $20,635 so with a voucher it would run me about $17000. However, I imagine most people - including myself - are not going to buy the bare basic vehicle if they're going to buy a new one. I decided to build my own on Ford.com and came up with a MSRP of 23,065 for a 2009 Ranger XLT 4x2 5 speed automatic with privacy glass, rear sliding window, rear jump seats, and a Sirius radio. With voucher, that truck should cost me around $20,000.
The problem is that even if I trade it in, most people will end up getting dealer financing because they went in the dealership without pre-approved credit lines. Therefore, they will end up paying higher interest rates on the vehicles that they just bought. Sound familiar?
The biggest problem if people are struggling to make due now, how can they afford a new car payment? If they are already paying a car payment, how can they afford possibly paying a higher payment? Sound familiar?
People must still make those car payments on the reduced price of their vehicle. Remember when people received discounts on their mortgages so they could buy a house they couldn't possibly afford? We all know how that turned out...
So what happens when all these people can't afford their car payments? Is the government going to provide a bailout to rebuy these cars in danger of being repossessed? Sound familiar?
I believe we are creating an automotive version of the mortgage crisis. On top of that, with inflation right around the corner due to the Treasury injecting $3 trillion into the economy, paying off your debts is going to be much harder than it was 6 months ago. That is if you still have a job at that point also.
Let's talk REAL stimulus. It goes against everything the left believes in. Give every tax bracket a tax cut equivalent to $4500 to spend as they choose. That's a tax cut, not tax rebate. Rebates you have to pay back - just check your tax returns from last year regarding that $300 or $600 you got from the government. With that extra $4500, people could by durable goods (I'd like a new washer, dryer, and a dish washer), or afford to buy that health insurance or pay down on their debt faster. Bet you see government revenues rise as a result also. It's happened every time taxes have been cut. God forbid you keep the money you earn!
Dealerships have said it has been a great success - except for the government being behind in paying. Sound familiar? It's the same problem doctors have when getting their Medicaid payments. Plus, this $1 billion program is going to cost more than first thought. Just like every other government program ever created.
Here's where I see a problem.
I went to Ford.com and used their calculator to figure out what I would get for my 2000 Ford Ranger "clunker". I picked a 2009 Ford Ranger to upgrade to with a V6 instead of a 4 cylinder which gave me a voucher for $3500 instead of $4500. The bare basic 2009 Ranger is $20,635 so with a voucher it would run me about $17000. However, I imagine most people - including myself - are not going to buy the bare basic vehicle if they're going to buy a new one. I decided to build my own on Ford.com and came up with a MSRP of 23,065 for a 2009 Ranger XLT 4x2 5 speed automatic with privacy glass, rear sliding window, rear jump seats, and a Sirius radio. With voucher, that truck should cost me around $20,000.
The problem is that even if I trade it in, most people will end up getting dealer financing because they went in the dealership without pre-approved credit lines. Therefore, they will end up paying higher interest rates on the vehicles that they just bought. Sound familiar?
The biggest problem if people are struggling to make due now, how can they afford a new car payment? If they are already paying a car payment, how can they afford possibly paying a higher payment? Sound familiar?
People must still make those car payments on the reduced price of their vehicle. Remember when people received discounts on their mortgages so they could buy a house they couldn't possibly afford? We all know how that turned out...
So what happens when all these people can't afford their car payments? Is the government going to provide a bailout to rebuy these cars in danger of being repossessed? Sound familiar?
I believe we are creating an automotive version of the mortgage crisis. On top of that, with inflation right around the corner due to the Treasury injecting $3 trillion into the economy, paying off your debts is going to be much harder than it was 6 months ago. That is if you still have a job at that point also.
Let's talk REAL stimulus. It goes against everything the left believes in. Give every tax bracket a tax cut equivalent to $4500 to spend as they choose. That's a tax cut, not tax rebate. Rebates you have to pay back - just check your tax returns from last year regarding that $300 or $600 you got from the government. With that extra $4500, people could by durable goods (I'd like a new washer, dryer, and a dish washer), or afford to buy that health insurance or pay down on their debt faster. Bet you see government revenues rise as a result also. It's happened every time taxes have been cut. God forbid you keep the money you earn!
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