Archive for the ‘Auto Industry’ Category

“Cash for Clunkers” Math

by American Grams on Thursday, October 1st, 2009

How much did the “Cash for Clunkers” program really save you?

If you traded in a clunker worth $3500, you got $4500 off for an apparent “savings” of $1000.  However, you have to pay taxes on the $4500 come April 15th (something that no auto dealer will tell you).  If you are in the 30% tax bracket, you will pay $1350 on that $4500.  So, rather than save $1000, you actually pay an extra $350 to the feds.  In addition, you traded in a car that was most likely paid for.  Now you have 4 or 5 years of payments on a car that you did not need, that was costing you less to run than the payments that you will now be making.

But wait, it gets even better: you also got ripped off by the dealer.  For example, every dealer in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc. for $12,500 the month before the “Cash for Clunkers” program started.  When “Cash for Clunkers” came along, they stopped discounting them and instead sold them at the list price of $15,500.  So, you paid $3000 more than you would have the month before.  (Honda, Toyota, and Kia played the same list price game that Ford and Chevy did).

So let’s do the final tally here:

You traded in a car worth: $3500

You got a discount of: $4500

Net so far:  +$1000

But you have to pay:  $1350 in taxes on the $4500

Net so far:  -$350

And you paid:  $3000 more than the car was selling for the month before

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The Auto Industry – 40 Years and Still Failing

by American Grams on Wednesday, September 16th, 2009

The automobile industry and the labor unions have caused the problems they face today.  They have been on a free ride for years, taking advantage of the American consumers, and it finally backfired on them.  Mismanagement, gasoline prices, government regulations, labor costs and an apathetic attitude have all contributed to their failures.  The taxpayers should never have been held responsible for their actions.  This is unconstitutional, but no one in our federal government seems to be awake.  Is anybody home?

Gasoline prices are one of the problems.  Guess what, this is nothing new!  Back in the 1970’s gas prices started rising to a whopping 50 cents a gallon.  People were outraged.  Speculation was that if gas went over $1 a gallon people just wouldn’t be able to afford to drive any more.  My husband owned a foreign car at that time that got 45 mpg.  It was nothing special, just your basic automobile.  You can’t find cars today that can produce that kind of mileage.  We also purchased a new car – a 1975 Pontiac Trans Am equipped with the V8 400 engine.  One of the less efficient cars of the time, it only got 20 mpg.  Wow, a muscle car that actually beats many of the vehicles today in gas mileage standards.  So, back in the 70’s with the impending doom of higher gas prices, nothing was done to combat the issue.

In the 1980’s gas prices again became an issue.  American cars just weren’t providing the gas mileage consumers wanted so they turned to foreign imports.  Foreign cars were not something I had ever imagined owning, I always stuck with American products.  But in trying to find a car that would get better gas mileage the foreign cars provided something American cars could not.  We found a Datsun that could get 35-40 mpg, and as a second car found a Mazda that got 30 mpg.  Gas prices during this era would rise and fall even dipping below the $1/gallon mark.  It was still a concern of the American public, but nothing was being done by the automobile industry to address the issue.

Back in the 1990’s my daughter joined the electric car club in high school.  These high school students created alternative fuel vehicles and had yearly competitions between schools to see whose car was the best.  These students were able to design and build cars that ran off alternative fuels.  With limited resources they were able to succeed.  But their efforts didn’t impact the auto industry and gas prices continued to rise.

Occasionally you would hear of alternative fuel vehicles on the market.  Most were very restricted in marketing and often only available to government agencies or only on lease agreements.  They were never made readily available to the public.  One big problem with these alternative fuel vehicles is that they took the gasoline version and then converted it to an alternative fuel.  This made the car cost prohibited, because you not only were paying for the original car but all the additions to convert it.  Other manufacturing changes came along, like going from carbureted engines to fuel injection.  Emissions played a factor in the changes, and not always on the positive side of the mileage factor.  Yet no real alternatives had been produced.

During this time we again were looking for a new vehicle, and once again opted for a foreign car, one that gets 35-40 mgp or more.  American cars just didn’t offer what we were looking for.  They didn’t get the gas mileage, were uncomfortable to drive and cost more.

A few years later it looked like there might be some alternative fuel vehicles, at least some hybrid versions, being released that might fit the bill.  Saturn had announced a hybrid and we were extremely interested.  Unfortunately it seemed to die out, never to be heard from again.

Now it is almost the end of the first decade of the 2000’s and still no real alternative fuel vehicles are being produced by the big auto manufacturers.  We’ve had almost 40 years of dealing with higher gas prices and yet in those 40 years no automobile manufacturer could produce a vehicle addressing this issue.  40 years of failure and we need to bail them out!  If any one of them had put forth the effort and developed an alternative fuel vehicle at an affordable price they would have the market edge of every automobile manufacturer.  Bailouts wouldn’t have been necessary.

So due to the auto industries own deficiency we face more government regulations, including the government telling you what vehicles you can and cannot drive.  This is a ploy to force people into purchasing vehicles since the American automotive industry can’t seem to draw the consumer in without government interference.  Cash for Clunkers was just that type of program.  Give people government money so they can go out and purchase a car, because they surely won’t do it on their own in this economy.  To make it sound legit, we’ll sell it as an environmental strategy taking old gas guzzling vehicles off the road making way for more efficient vehicles.  Since the government now owns GM, we have to get the market rolling.  People took advantage, but most bought foreign made cars.  More tax dollars wasted.

Are there alternatives out there?  There might be.  A small auto manufacturer in California has developed a vehicle that runs off battery power/solar power with a gasoline backup system.  It is a rather unusual vehicle, but could provide the technology for future vehicles.  The solar power charges the batteries and when the batteries are fully charged, the excess power can be used to cool your car while parked.  Imagine actually looking to park your vehicle in the sun instead of the shade in the summertime and being able to enter a cooled vehicle!  The gasoline backup system is supposed to get 300 mpg and cars are equipped with a 2 gallon gas tank.  They have been addressing the government imposed issues as well as manufacturing problems, so the cars are only available to California residents.  Interest has peaked around the country and they have a huge waiting list.

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