The Real Effect of Cash for Clunkers ... - PowerStrokeNation : Ford Powerstroke Diesel Forum
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post #1 of 17 (permalink) Old 10-08-2009, 12:51 PM Thread Starter
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The Real Effect of Cash for Clunkers ...

From a real "Car Guy" out in Los Angeles , CA .

__________________________________________________ ____________
SO...you took FEDZILLA up on its offer of $4500. Dollars to trade in your old "Clunker" (interesting choice of words)? Well, let's see who got the best of that "deal"...

If you traded in a clunker worth $3500, you got $4500 off for an apparent "savings" of $1000. You could have gotten $3,500 if you had just traded the car in. So you really are $1,000 ahead (depending on your clunker's value) at this point. Not too bad...

However, you WILL 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 will 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, trading in a "clunker" that was costing you less to run than the payments that you will now be making. Even if you save $1,000. Dollars a year in gas due to better mileage, you're still gonna be in the red for five years....hello?

But wait, it gets even better: you also got ripped off by the dealer. For example, the month before the "cash for clunkers" program started, every dealer here in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500. Because competition was stiff due to poor sales from the stalled economy.

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. Now let's do the math...
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 (that's minus...in the red)
And you paid: $3000 more than the car was selling for the month before
----------
Net Loss: -$3350

We could also add in the additional taxes (sales tax, state tax, dealer prep, etc..) on the extra $3000 that you paid for the car, along with the Five years of interest on the car loan; but let's just stop here while you kick yourself. Suffice it to say that those costs will be much higher than any savings you get from "better mileage".

So who actually made out on the deal? FEDZILLA collected taxes on the car along with taxes on the $4500 they "gave" you. The car dealers made an extra $3000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. Manufacturers got to dump lots of cars they could not give away the month before. Lots of good or repairable used cars got taken off the market, crushed and sold as scrap metal to (ready for this?) CHINA ! (Look it up...) And the poor consumer got saddled with even more debt that they cannot afford.

FEDZILLA'S merry men (who promised that people making less than $250,000. Would pay "not one red cent more in taxes") will make millions in new tax revenues after convincing Joe Consumer that he was getting $4500 in "free" money from the "government" In fact, Joe was giving away his $3500 car and paying an additional $3350 for the privilege. Chicago politics gone global...with an agenda.

If you find errors in this math, please let me know...being a simple guy, I'm always willing to learn new things; and if you took "advantage" of the Clunkers deal, I have some swamp land down in Florida that's for sale...

And remember, these are the same Einsteins who want to take control of our health care system. Hold on to your wallet!!

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post #2 of 17 (permalink) Old 10-08-2009, 12:59 PM
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Re: The Real Effect of Cash for Clunkers ...

apparently that azzhole cant do math. not sure i would want him as my salesman.

if you read it, he says "the month before cash for clunkers started..."

then why is he bundling that math with the cash for clunkers math in his little net loss column there???

just another gimmick.
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post #3 of 17 (permalink) Old 10-08-2009, 01:15 PM
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Re: The Real Effect of Cash for Clunkers ...

Quote:
Originally Posted by Hawker View Post
if you read it, he says "the month before cash for clunkers started..."

then why is he bundling that math with the cash for clunkers math in his little net loss column there???
that's because if you would have bought the car a month before... you would have paid around $3000 less for the car, so that is why he is adding that $3000 to the math that he did. For example, my wife and I were looking for her a car during this time, (we don't qualify for the "clunker" deal) and we actually saw this. The same car during cash for clunker deal was a few thousand more at a few places that a few weeks before (we looked for almost three months), not all, but most that we looked at. I'm not defending the post or anything, but just stating my own experience.

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post #4 of 17 (permalink) Old 10-08-2009, 01:34 PM
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Re: The Real Effect of Cash for Clunkers ...

but hes adding the deficit your paying in the tax on the cash for clunkers money with the money you would saved out of pocket before the cash for clunkers was even in effect. it's padding it so it looks bigger, when its actually not.

like widgets.

a company is selling widgets this week for $10 off.
you have a coupon for $15 off next week.

at no point can you say you couldve saved $25 off a widget because one sale never overlapped the other.
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post #5 of 17 (permalink) Old 10-08-2009, 03:08 PM
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Re: The Real Effect of Cash for Clunkers ...

There is no federal income tax on cash for clunkers. The email is a hoax.

When you traded in a vehicle under cash for clunkers, the owner didn't receive the money. Instead, a voucher is issued to the dealership, not the car owner. In return, the dealership discounts the car for the voucher amount.

So it's not income that is received, therefore it is not taxable. The email lied.

I'm sure the email also lied about the price hike of the Ford Focus too.

Curtis
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post #6 of 17 (permalink) Old 10-08-2009, 03:16 PM
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Re: The Real Effect of Cash for Clunkers ...

Quote:
Originally Posted by Pocket View Post
There is no federal income tax on cash for clunkers. The email is a hoax.

When you traded in a vehicle under cash for clunkers, the owner didn't receive the money. Instead, a voucher is issued to the dealership, not the car owner. In return, the dealership discounts the car for the voucher amount.

So it's not income that is received, therefore it is not taxable. The email lied.

I'm sure the email also lied about the price hike of the Ford Focus too.
Curtis is correct on most of his statement. The price hike portion is true

Since the voucher was issued to the dealer and not the consumer, the consumer cannot be taxed on the $4500 as income.

Dave G

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post #7 of 17 (permalink) Old 10-08-2009, 03:32 PM Thread Starter
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Re: The Real Effect of Cash for Clunkers ...

Quote:
Originally Posted by Pocket View Post
There is no federal income tax on cash for clunkers. The email is a hoax.

When you traded in a vehicle under cash for clunkers, the owner didn't receive the money. Instead, a voucher is issued to the dealership, not the car owner. In return, the dealership discounts the car for the voucher amount.

So it's not income that is received, therefore it is not taxable. The email lied.

I'm sure the email also lied about the price hike of the Ford Focus too.
No Federal Income Tax but it may be a State Income tax.

http://www.businessinsider.com/whoop...t-taxed-2009-8

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post #8 of 17 (permalink) Old 10-08-2009, 03:36 PM Thread Starter
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Re: The Real Effect of Cash for Clunkers ...

Quote:
Originally Posted by CGMKCM View Post
No Federal Income Tax but it may be a State Income tax.

http://www.businessinsider.com/whoop...t-taxed-2009-8
From Snopes

http://www.snopes.com/politics/taxes/clunkers.asp

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BTS Tranny
PHP Phoenix chip
H2E Turbo With WW II
Adrenalin
Banks Intercooler and exhaust
In tank and pre-pump mods
Numerous minor Mods

Other Diesels
08 GL 320 CDI
02 VW Golf TDI
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post #9 of 17 (permalink) Old 10-08-2009, 03:40 PM
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Re: The Real Effect of Cash for Clunkers ...

Quote:
Originally Posted by Dave View Post
The price hike portion is true
Which portion of the price hike is true? Did all Ford Focus's across the country experience a simultaneous price hike right when cash for clunkers began? Or was it just a sporadic thing seen only at a handful of shady car dealerships?

Yes some dealerships participated in shady pricing, and I'm sure you can spot a few price hikes here and there from individual dealerships. That's no secret. However, the overall market price across the country for vehicles did not change. Most factory rebates, incentives, special financing, etc ran until the end of the cash for clunkers program. Auto makers and dealerships weren't stupid, they knew a very short term buying rush was happening, so competition to gain that customer in a short few weeks was tough. If a dealership was not going to bargain with the customer, the customer would go somewhere else. The guiding issue here was time, and time was not on the dealership's side.

The cash for clunker's program was very specific that any factory or dealer incentives offered also applied to cars purchased under the cash for clunkers program.

What we have seen is a national rise in prices after cash for clunkers ended. When the program was all said and done, inventories were low. When supply runs low, prices go up. It's simple economics.

So really, the email is a bit misleading. Sure a few people saw some dealerships rip them off with underhanded price hikes. It happens on a daily basis, so that can't really be attributed to cash for clunkers. Overall, prices for vehicles under cash for clunkers remained the same, and incentives remained intact until the program was finished.

Curtis
2002 F-250 PSD
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post #10 of 17 (permalink) Old 10-08-2009, 03:47 PM
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Re: The Real Effect of Cash for Clunkers ...

Curtis I saw it at most of the dealers in my area. As I was looking for a replacement for Katies car at the time. Ford, Chevy, Turdota, Moparts. You name it. Their prices all went up about 3500 bucks when cash for clunkers was going on. Guess what they are all back down now. And most have equivalent rebates to what Cash for Clunkers was offering.

I was looking at an Escape for here. Before cash for clunkers I had it priced at about $22,5 while cash for clunkers was going on I went in and spoke to the same salesman. Price was up to $25,700.

Bear in mind this is at a dealer that my family has spent approximately $200k on vehicles and maintenence at over the last 3 years

Dave G

06 F250 Lariat 4x4 leveled on 35s

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