September 9, 2009

Cash for Clunkers Micro-Economies

The basic goals of this federal initiative were to stimulate the economy while moving more Americans to eco-friendlier cars.

The premise: If you trade in your old, broken-down gas guzzler that gets <18 mpg and move up to a certain MPG-approved vehicle, the federal government would subsidize your trade-in, up to $4,500.

So, now, broken-down trucks sitting in a parts dump were potentially worth $4,500. Do you think any micro-economies developed over this initiative? For example, none of my cars currently get under 18 mpg. But, if I was in the market for a new car, purchasing an old junker at anything less than $4,500 would be worth my time.