Monday, September 6, 2010

The Obama Follies

‘Clunkers,’ a classic government folly
IN THE market for a used car? Good luck finding a bargain: The price of “pre-owned’’ vehicles has climbed considerably over the past year. According to, a website for car buyers, a three-year-old automobile today will set you back, on average, close to $20,000 — a spike of more than 10 percent since last summer. For some popular models, the increase has been much steeper. In July, a used Cadillac Escalade was going for around $35,000, or nearly 36 percent over last July’s price.
Why are used-car prices rocketing?
It is as basic as supply and demand!
Part of the answer is that demand is up: With unemployment high and the economy uncertain, some car buyers who might otherwise be looking for a new truck or SUV are instead shopping for a used vehicle as a way to save money.
But an even bigger part of the answer is that the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers. That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine, and send the car to be crushed or shredded.
I foresaw this a over a year ago.

This will inflate prices in the affordable used car market AND the used auto parts market!!!

Yes, I told you so.

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