The Recession

How People Can Game the Gov's 'Cash for Clunkers' Giveaway

| by Cato Institute

My son’s station car is an old Ford Explorer AWD which, despite being a V-6, was
rated at about 15 mpg. Approaching 100,000 miles, the SUV’ s resale value is
very low.

The House approved a bill to give him a $3,500 voucher to buy a car that is
supposed to get only 18 mpg, or $4,500 if it gets 20 mpg. Only 18-20 mpg? That’s not moving us much closer to President Obama’s pie-in-the-sky 35.5 mpg
goalpost is it?

Consider how easy it would be to game this giveaway program
by using that $4,500 voucher to buy a big SUV or V-8 muscle car.

First of all, with Chrysler and GM dealerships folding, it should be easy to
buy a mediocre Chevy Cobalt or Dodge Caliber for about $10,000 more than the
voucher.

What you do next is sell that boring econobox, even if you
end up with $1,000 less than you paid — that still leaves you with $3,500 of
free money, courtesy of taxpayers.

As this process unfolds, the flood of resold small cars will make it even
harder for GM, Chrysler and Ford dealers to get a decent price for small cars,
because of added competition from new cars being resold as used.

That’s their problem, not yours.

So, take the $9,000 net from reselling the crummy little car plus the $4,500
from Uncle Sam. Then use that $13,500 to make a big down payment on a
used Cadillac Escalade, Toyota Tundra pickup or Corvette.

File this under “unintended consequences” (my own file is running out of
space).