Tuesday, October 06, 2009

Cash for Clunkers: Buyer's Remorse

I wish I were possible for Congress and the long line of government expansionist Presidents that we’ve had to get buyer’s remorse. They don’t, because they’re often very well insulated from accountability. Unless you’ve been living under a rock the last few months (got room for a couple more?) you’ve probably heard of the Cash for Clunker’s program.

According to Dave Ramsey, this program generated a lot of buyer’s remorse. It will probably generate a lot of other remorse in the future, like when the demand that got pushed up isn’t there later on when those people would have bought cars anyway. Dave Ramsey ranted about this program. Dave reads an article on AOL Autos and supplies his commentary. If you like Dave’s rants and commentary, don’t miss this one.

If you’d like to follow along on the original article, you can easily Google it. Or, I can save you the work. Here it is.




My wife and I briefly discussed participating in Cash for Clunkers. Her ‘95 Windstar needs a bit of work. The Check Engine light is on. My mechanic told me it has something to do with the camshaft and it requires a tool that only dealers have. Ford won’t sell it. My 2003 Kia Sedona needs brakes and a $600 tie rod job.

The kicker is, our cars are paid for. They’ve been paid for. We don’t have a car payment. We don’t want one.

I ran the numbers. If we were to buy a low end 30 MPG car, like a Hyundai Accent or a Toyota Yaris or a Nissan Versa, base model, with the C4C rebate, I’d have to drive the car approximately 150,000 miles to break even. That is, even though my Sedona gets about 14-17 MPG, it has no car payment. If I spent $10,000 on a car (even a base model with C4C, but tack on tax, title, and license plus warranty and stuff), I’d have to drive it 150,000 miles to break even on the difference in cost between just putting gas in a low-mileage car that is paid for and putting less gas in a car that gets better mileage but has to be paid off. Even factoring in $1500 (just a figure for discussion, not based on actual estimations) in maintenance on our two cars, it’s still more than 100k miles to break even.

I also realized something else: I really don’t want to have to drive a tiny little car. I know they’ve done a lot with 4 cylinder engines since the last time I owned a car with one. I’ve rented Nissan Versas, Ford Focuses, and Chevy Cobalts. I won’t lie: they haul! I’ve been impressed by all of them (engine wise- the Versa was NOT comfortable to drive 250 miles). But they’re still tiny.

Statistics show that larger cars are safer. Highway fatalities went up in the 70’s when everybody transitioned to smaller cars. In an accident, you have a higher statistical chance of surviving in a larger car.

When I first got my driver’s license, my mom actually wanted me driving something really large. The problem was, she didn’t want to pay for it so I ended up using my dad’s 1987 Hyundai Excel.

I have nothing against smaller cars, but I don’t want to drive one.

I know several people who want to buy a new car to “save money”. The problem with that thinking is, after running the actual numbers, you’re not saving anything, especially if your car is paid for. You might be saving on one cost (gas), but you’re blowing money out of your bank account in other areas (payment, interest, and depreciation).

If you want to drive a small car, don’t let me stop you. If you want to trade in a paid for car on a car with a car payment, I’d like to talk you out of it, but don’t let me stop you. If you think by buying a new car you’ll “save money”, then please, let me stop you. At least, let me stop you long enough to be honest with yourself. Then, if you’re OK, then just buy it. I won’t be buying a new car. I’ll just keep mine, and find the money for the maintenance.

Did you participate in Cash for Clunkers? Did it work out for you?

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