The latest development in the “Cash For Clunkers” legislation is that it may be extended for one more month until labor day. Under the program, buyers of new cars and trucks can get rebates of $3,500 to $4,500 by trading in older models that are then scrapped.
Seriously though, is this multi-billion dollar government works program just money spent to appease the car lobbyists? Or is the goal really to get old cars off the streets and save the environment? The good thing is that these old cars are getting scrapped.
Otherwise, if you trade in your gas guzzling SUV for a Honda Civic, you’ve NET ADDED to the world’s pollution because someone is still driving your old car, and the new Civic still emits waste!
This is what I’ve never understood about the “holier than thou” crowd who buys hybrids like the Prius. It’s great that you are driving an environmentally friendly car, but if you start looking down on non hybrid drivers with disdain, that’s hypocritical. Buying a new Toyota Prius simply adds to pollution if you don’t scrap your old car.
The only way you’re going to really make a difference is if you scrap your old car and just take public transportation and ride a bike! Again, I’m absolutely for driving a nice low emissions car, but the fact of the matter is that these cars are expensive. I’m not spending $30,000, and if you look down on someone who can’t afford the $7-10,000 premium for hybrids then shame on you!
The real problem with this legislation is that it’s giving money to people who don’t need it. If you are driving a car valued at $4,500 or less, it’s probably unlikely you can afford to buy America’s average car price of $25,000! I strongly suggest you stick with my 1/10th rule, which states that you should spend no more than 1/10th your gross income on cars.
Hence, only until your income or your combined income is $250,000 should you be buying America’s averaged price car. Spending more than 10% of your gross income on a car is absolutely ludicrous if you’re serious about early retirement, savings, and investing. Say no to car debt!
Supposedly 167,000 transactions worth $667 million have gone through already. I bet that a good percentage of these transactions were made by people who overextended themselves financially to get into that shiny new $38,000 luxury automobile.
The thought process is that they can “save” over 10% on the value of this luxury automobile they’re eyeing if they trade in their car. You’re not saving anything! The $3,000-$4,500 is likely the value of your car, unless you’ve got such a heap of junk that you’re getting an extra $2,000-$3,000 worth, in which case you definitely shouldn’t be buying a $25,000 car!
When this is all said and done, the government’s plan to boost the economy and improve the environment is going to backfire. There will be thousands more debtors driving depreciating assets and flushing valuable money down the drain every month.
If your gross income is not at least 10X the value of the car, and if you can’t pay cash (you don’t have to, just as long as you can), then don’t fall for this “spend more save more” trap the government is hawking!
Readers, love to hear your thoughts. I know this has nothing to do with the employment and career agenda, but it is topical, and you guys know how much I love cars!
See: Follow The 1/10th Rule For Car Buying
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Updated for 2021 and beyond.