Everybody knows that autos depreciate — i.e., in constant dollars they get cheaper every year. For the Boston Globe Jeff Jacoby discusses how government policy caused prices to go up rather than down, by distorting the rate of fleet replacement. Poorer drivers were penalized to subsidize new cars for wealthier drivers.
IN THE market for a used car? Good luck finding a bargain (…)
(…) But an even bigger part of the answer is that the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers. That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine, and send the car to be crushed or shredded.
(…) Alec Gutierrez, a senior analyst for Kelley Blue Book, predicted that used-car prices would surge by up to 10 percent. “It’s going to drive prices up on some of the most affordable vehicles we have on the road,’’ he told USA Today. In short, Washington spent nearly $3 billion to raise the price of mobility for drivers on a budget.
(…) When all is said and done, Cash for Clunkers was a deplorable exercise in budgetary wastefulness, asset destruction, environmental irrelevance, and economic idiocy. Other than that, it was a screaming success.
Read more » do read the whole thing.
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