Saturday, August 22, 2009

Cash For Clunkers

"Good design can't fix broken business models." ~ Jeffrey Veen


OK. Let me add my two cents about Barack Hussein Obama's "cash for clunkers" program.

Many people may believe this is only Obama's scam.

But, the dealers are in on it, too.

One or two of my regular readers may remember last year, my wife purchased a brand new 2008 Kia Spectra from the local Kia dealership here.

Since then, the Ford Taurus she gave me has developed some rather expensive problems. I am not sure exactly what they are, but when there is an audible clunk and a violent jerk between the automatic transmission's first and second gears, it cannot be a good sign. Add to that, a high pitched squeaking sound emanating from under the hood somewhere in the vicinity of the alternator, and the fact that the battery won't hold a charge, I'm thinking any repairs done to it will ultimately end up being more costly than the car is worth.

So, my wife and I set out on a quest to find a suitable replacement yesterday.

The first thing I noticed upon entering the Saturn dealership was all the new cars being displayed on the lot had numbers and letters painted on their windshields that advertised the prices before and after the cash to be paid for the buyer's "clunker".

Not having been in a Saturn dealership before, I had no idea what the regular price for a Saturn should be, but considering Saturns have plastic bodies, I thought the prices shown were rather high.

I began to suspect the dealership had possibly raised the sticker prices on the new cars approximately $4500.00 so they could take full advantage of Obama's generous offer to consumers.

This is an old ploy in retail sales, particularly, in retail car sales.

See, what retailers do is raise the prices on their products before they advertise a sale. For example, a furniture dealer (furniture dealers and car dealers are probably the most common retailers that pull this scam) raises the price on a recliner by 50 to 100 dollars. Then, they advertise a great big "going out of business" sale, or a "lost our lease" sale, etc, and inform their prospective customers that they will reluctantly let their recliners go with a whopping 35-75 dollar discount.

Thus, not only do the dealers receive more than the manufacturers suggested retail price (MSRP), they get a bit of an extra profit on top of that.

And the customer thinks he got a bargain.

There is a common retail sales term for this practice but I can't remember what the term is. I used to know, because the management of a company I once worked for made it very clear that those tactics, if utilized by a salesman, would not be tolerated. The company was proud of the fact that they did not resort to questionable tactics to make sales.

In the end, the company went bankrupt because they lost too many lawsuits filed against them for using unethical sales practices.

But I digress.

After test driving a nice SUV, we then went back to the Kia dealer from where we last purchased a vehicle. Upon entering the sales lot, the first thing I noticed was the advertising painted on every new car's windshield, also advertising before "cash for clunker" prices, and after "cash for clunkers" discounts.

The second thing I noticed was that the prices before Obama's promised rebates were about $5,000.00 higher this year for the same models then they were last year.

Coincidence? Inflation? I don't think so.

The dealers are losing nothing on the "cash for clunkers" deal. In fact, the dealers are in Fat city. Not only do they get reimbursed for every $4,500.00 they pay out to customers who trade in a qualifying clunker, if the government does indeed reimburse them (which would make another entire blogpost in itself), but they still get the MSRP on every sale, meaning the dealer will get their standard profit plus an extra $4500.00, courtesy of --- who?

Why, us! The American taxpayer!


Oh, and by the way. Do you know what cars qualify as clunkers in this benevolent Obama government program?

To qualify, your clunker doesn't necessarily have to "clunk".

It just has to have 18 or less MPG.

By the book.

In other words, if your "clunker" was, when it was new, originally estimated to get an average of 18 miles or less to one gallon of gas (highway non-stop driving) your car qualifies as a "clunker".

Regardless of whether it still runs perfect or not.

My Ford Taurus, which makes an audible "clunk" when shifting from first to second gear, does not qualify as a "clunker". It's average estimated MPG, when it was brand new, never been driven, still on the lot, is 27 on the highway. I don't remember it ever getting better than 20 MPG on it's best days.

Cars that qualify as a "clunker", outside of a few SUV's and the Hummer, represent woefully few of the real clunkers now on our nation's roadways.

Also, while I'm on the subject, do you know what they do with the cars that they pay $4500.00 for? They drain all the fluids out of them, run the engines until they "lock up", and then send them off to the salvage yard to be crushed and ostensibly recycled to make yard ornaments and other attractive and useful items.

Well I'm not sure about that, but they do ship them off to the metal salvage companies.

That's part of Obama's law.

The salesman we talked to last night said many cars that were in good working condition were sent off to salvage along with the real clunkers. Meaning the dealer could conceivably clean them up a little, do some minor repairs, and resell them at a huge profit, but the government won't allow them.

They are to be scrapped, regardless of condition.

This strikes me as an enormous waste of money and common sense.

So, basically, this whole "cash for Clunkers" deal is a huge unethical scam, which frankly, can be expected from unscrupulous, slimy, shady, used car dealers and furniture dealers, etc.

Don't get me wrong. I'm all for making a profit, and if a businessman can make huge profits without resorting to unethical, illegal tactics, more power to him.

But, it is absolutely scandalous when it comes at the hands of a supposedly benevolent, empathetic, Democratically run Federal Government.

And that, as Kevin Jackson would say, is my rant.

16 comments:

Jim said...

"Many people may believe this is only Obama's scam."

What's the "scam" here? A "scam" implies an illegitimate profit. What is Obama's illegitimate profit?

"I had no idea what the regular price for a Saturn should be"

Are you not familiar with any number of web sites that will tell you pretty accurately what prices for each make model and options in your zip code should be, both MSRP and True Market Price? Sites like Edmonds.com. An informed buyer makes a wiser purchase.

"I began to suspect the dealership had possibly raised the sticker prices on the new cars approximately $4500.00 so they could take full advantage of Obama's generous offer to consumers."

This defies logic. Only a fool would fall for this. It's a buyer's market. See informed buyer above. Why would anybody even consider a such a deal?

"meaning the dealer will get their standard profit plus an extra $4500.00,"

You are contradicting yourself here. You said in this same sentence that the dealer is being reimbursed for the money THEY PAY to the buyer. So there is no EXTRA $4,500 here for the dealer. The only benefit for the dealer is that he gets a sale (hard to come by these days) and the profit is up to his pricing and the buyer's savvy. C for C is cash neutral for the dealer.

"Meaning the dealer could conceivably clean them up a little, do some minor repairs, and resell them at a huge profit, but the government won't allow them."

Right, because THAT would be the scam. C for C gets the dealer a sale, the manufacturer a car built, the autoworkers a job, but it doesn't give the dealer an opportunity to make a killing.

"They are to be scrapped, regardless of condition."

Right, because besides stimulating the auto industry, the point of this plan is to get these cars PERMANENTLY off the road, not recycle them.

Time to step back and rethink on this one.

Lone Ranger said...

ALL democrat policies hurt people. And the people who are hurt worst are usually small businesses, blacks and the poor. Taking all these perfectly good cars off the road means fewer used cars for people who can't afford new ones. It is also hurting small mechanics businesses. I'm waiting to see about six months or a year out how many of these new cars will be repossessed because the people who bought them should have been buying a used car.

Your post illustrates my in disputable truth about liberals #7: 7. Whenever you don't understand a liberal's motives, just look for the money.

Most Rev. Gregori said...

This "cash for clunkers" is Constitutionally illegal! Show me where in the Constitution Obama has the right to use taxpayer money to hand out to car dealers.

How is this even remotely fair to those taxpayers who don't earn enough to trade their "clunkers" in for a new car, since they cannot afford the monthly payments, yet their tax money is being used so that those who make more money can get a new car?

Mark, I haven't gotten a new computer yet. I plan to pick one up in two weeks. I will check out the one at Wal-Mart.

Mark said...

Jim, your stupidity is exceeded only by your level of class envy.

For example: "Only a fool would fall for this."

Yes, and that's the kind of people they are hoping to attract. Fools. Those usually are the same people that think one can still get something for nothing, such as the fools that have an entitlement mentality from living their entire lives depending on Welfare.

"You said in this same sentence that the dealer is being reimbursed for the money THEY PAY to the buyer. So there is no EXTRA $4,500 here for the dealer"

I also said the dealers raise the sticker prices over $4500.00, so in essence, IF Obama ever really does reimburse the dealer for the money(which is debatable), that's 4500 over and above the usual sticker price.

Is that too hard for you to understand?

"Right, because THAT would be the scam."

No, that is the way the used car business works. If the car is worth fixing and re-selling, dealers always do that. That's why many cars have as many as 4-5 owners before it's consigned to the salvage yard. It's called smart business. Any dealer that won't repair and re-sell good cars for a profit is a stupid businessman.

"it doesn't give the dealer an opportunity to make a killing"

There you go again. Complaining that some people actually work to make a profit. Why all this jealousy, Jim? Surely you don't begrudge a man to make a profit to feed his family, do you?

"he point of this plan is to get these cars PERMANENTLY off the road, not recycle them."

The point is to throw good money away and take all affordable cars off the street so only the wealthy can afford their own personal car? Is that what you mean, Jim? Do you have stock in the Metropolitan transit authority?

It is a waste of government money to buy the "clunkers" and just toss them on the scrap heap. Any fool could see that.

I guess that classifies you. Somewhere below the level of "fool".

Jim said...

"How is this even remotely fair to those taxpayers who don't earn enough to trade their "clunkers" in for a new car, since they cannot afford the monthly payments, yet their tax money is being used so that those who make more money can get a new car?"

Hey Rev! Aren't these poor people the ones you claim PAY NO TAXES? That argument goes nowhere.

Mark, your "class envy" bs is...bs. I have no class envy. I make money, enough to pay taxes and I don't have any problem paying them. And I don't have any problem with my taxes going to serve the greater good or those who need some help.

Only an idiot would pay a dealer an extra $4,500 dollars on a car. Every new car has the MSRP on it and the dealer markup if any. Anybody who couldn't see that the price was being jacked up is foolish. I don't believe any of this has happened and I challenge you to provide any evidence that it has.

Every dealer who does a C for C deal will get their money. There is no doubt as long as the cars qualify and the deadline is met. It is NOT debatable.

"No, that is the way the used car business works." It would be if the dealer were buying the old car as a trade-in. They are not. The government is buying it as a trade-in for $4,500. The dealer is only selling a new car.

"There you go again. Complaining that some people actually work to make a profit. Why all this jealousy, Jim? Surely you don't begrudge a man to make a profit to feed his family, do you?"

I'm not complaining at all. And there you go again with the lie about my alleged jealousy bullshit. The dealer makes a profit selling the new car. The old car is to be removed from the road. It would be another thing altogether if the dealer was putting any money into the old car as a credit for a trade-in. They are not. Get it? If the dealer were allowed to fix up the car and sell it, of course they'd make a killing selling something that cost them nothing to begin with. Man, such cluelessness is surprising.

Well, no it's not.

"The point is to throw good money away and take all affordable cars off the street so only the wealthy can afford their own personal car?"

Everybody involved in Cash for Clunkers sees it as a success. I guess the whole thing is just way over the heads of you troglodytes.

Jim said...

"The point is to throw good money away and take all affordable cars off the street so only the wealthy can afford their own personal car?"

The absurdity of this question is simply astounding.

Trader Rick said...

Only people with older SUV's and big pickups are benefiting from this scam. A car actually worth $4500 is not a "clunker".

Obama is a moron and those who believe in him are brain-dead. God Save Us ALL.

Jim said...

TR, thanks for your daily dose of blather. I feel much better now.

Joe said...

Not only is the Cash for Clunkers program a major league SCAM, the government has failed to reimburse dealerships for the money they "saved" their customers.

Several dealerships in my locale will probably have to go out of business before the government comes through.

At first, dealers were extatic at the "new" business they were getting. They are very unhappy now, because they had to take the $4,500.00 off the price of the new car and have not been reimbursed for it.

Whether they raised the price before hand I cannot say. A couple of the dealers I have personally known for a long time, and it would surprise me for them to have done so.

At any rate, the SCAM here is the one perpetrated on the American people by taking $3 billion of everybody's tax money and not even doing what they said they were going to do with it.

These are the same guys who want us to trust them with our health care.

Maybe others will fall for it, but not me.

Jim said...

Joe, you must be listening rational free Beck TV or something. What you've said is completely false.

The program WILL reimburse EVERY transaction that meets the requirements and the deadline. Every one. The fact that there is a back up because the program was more successful than expected is of little significance. The money will be paid.

"Several dealerships in my locale will probably have to go out of business before the government comes through."

If so, it will have nothing to do with Cash for Clunkers.

"not even doing what they said they were going to do with it."

The government is and will do exactly what they said they are going to do with it. Here you are offering a lie that has no basis in fact. I might as well suggest your employer fire you because there is no proof that you will show up for work tomorrow morning.

Most Rev. Gregori said...

Jim that is pure B.S. I worked a secular job to support my family as well as carrying my ministry as an Orthodox Priest. I never earned enough to afford payments for a new car. I always paid taxes on every thing I earned. The only ones that don't pay taxes are those on welfare and the super rich who always find a way to shift their tax liability on to those at the bottom.

Jim O'Sullivan said...

Indeed, we have met the enemy, and he is us.

Joe said...

Jim: See a psychologist, man. You are trying to deny what is ACTUALLY happening.

The dealers I personally know: John Scanlon in Fort Myers, and Paul and Pat Langford in LaBelle have participated in the CC program and as of last week HAVE NOT YET RECEIVED THE FIRST DOLLAR FROM THE FEDS. That's the way it is...like it or not.

Turns out it is YOU who does not know what he is talking about.

You are one of those who thinks something is true because you want it to be and/or because you said it was true...therefore it must be.

But it isn't.

Mark said...

Hey, Jimeo! That's on my sidebar!

Jim said...

So Joe, you're suggesting that the government is going to cheat car dealers out of $3 billion dollars and nobody will figure it out and the dealers will just say, "Oh well"?

Get a grip. The C for C program was so successful that the feds are behind in processing. EVERYBODY LOVES C FOR C! Dealers will get there money.

Rev said:

"The only ones that don't pay taxes are those on welfare and the super rich who always find a way to shift their tax liability on to those at the bottom."

Then why are you so against the super rich paying a fair share?

Cameron said...

The top 1% of earners pay almost 40% of the income tax. The top 0.1% pay 20% of the tax. If not these, what percentages would qualify for their "fair share"?