It looks as if this idea—turning in older, less fuel-efficient cars and getting a government rebate with which to help finance a new one—might be passed into law. Conceived to clean up the air by removing old cars with bad emissions from the roads, this idea has now been transformed into a method of helping the failing American auto industry. But will it help Americans? Is what’s good for General Motors still good for the USA?
I’ve already considered this issue as a theory (see my post “Old Cars for New Debt” from August 19, 2008), but now I get to check it out as a reality. A friend of mine has a ten-year-old American-made car (paid for) with 130,000 miles on it. My friend has to use premium gasoline to run it (ouch). And my friend has just had some repairs done that weren’t cheap. But all the recent repairs don’t add up to anything like an average new car payment.
That’s the problem. My friend could benefit from this new law—in theory. But my friend does not have the income to make a monthly car payment. Not this year, and certainly not for four years or more. Another issue is that my friend’s car already gets around 20 miles to the gallon, even though it is a station wagon. To get substantially higher mileage per gallon without going to a luxury vehicle, my friend would have to get a much smaller car. Which would not fulfill my friend’s needs for transportation. My friend routinely hauls a lot of stuff around in the car. But there’s still the problem of not being able to make a monthly car payment.
What about going down to a compact car and not hauling anything? Inconvenient, but a much cheaper car. The Chevy Cobalt and the Ford Focus (both 30+ mpg) are two American brands to consider, and maybe, with incentives, could be purchased at around $15,000. But even with 0% financing on a five-year car loan, the car would cost $250 a month. My friend does not have an extra $250 a month; luckily, car repairs are running much less than that.
Plus there’s the fuel economy issue if my friend tries to stay with a car big enough to haul. The Ford Flex, a big station wagon costing around $30,000, gets 17 miles per gallon in city driving, the only kind of driving my friend does. The Pontiac Vibe, at closer to $20,000, gets only 27-29 miles per gallon, an improvement, but a 0% five-year car loan for that would mean a monthly payment of $333. Even more out of reach for my money-starved friend.
Do I seem to be going around in circles? That’s because people don’t drive ten-year-old cars just for the fun of it. They drive them because they cannot afford to buy newer and more expensive vehicles. I’m not against a government discount. But the people who will benefit most from this are the ones who have a second or third car hanging around the driveway that they seldom use, who can afford to buy a brand new car. Not my friend’s situation, and perhaps not yours, either.