Clunker trade in info


10 Years
Jul 14, 2009
shenadoah valley
If you traded in a clunker worth $3500, you get $4500 off for an apparent "savings" of $1000.

However, you 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 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, that was costing you less to run than the payments that you will now be making.

But wait, it gets even better: you also got ripped off by the dealer.

For example, every dealer in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500 the month before the "cash for clunkers" program started.

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).

So lets do the final tally here:

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

And you paid:-----------------$3000 more than the car was selling for the month before


We could also add in the additional taxes (sales tax, state tax, etc.) on the extra $3000 that you paid for the car, along with the 5 years of interest on the car loan but lets just stop here.

So who actually made out on the deal? The feds 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. The manufacturers got to dump lots of cars they could not give away the month before. And the poor stupid consumer got saddled with even more debt that they cannot afford.

Joe consumer was convinced he was getting $4500 in "free" money from the "government" when in fact Joe was giving away his $3500 car and paying an additional $3350 for the privilege.

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Well glad we didn't even consider trading in one of our cars!

I didn't do the math, but I just thought - the people trading in these old cars are probably the ones least likely to be able to afford a new car in the current economy. I didn't think the gov't was doing any favors for them.
When I first saw this, I was instantly skeptical. Not only that, do you know how they termiante the cars? Putting some kind of extremely bad-for-the-environment acid in it that seizes up the engine, making it completely useless. Um, what? Why not recycle some of the parts on these cars? Why destroy them completely? Oh ya, thats right, because they dont really want to help the environment (even though thats the speil they give) they just want you to be in debt to them even more.

Its ridiculous, and thank you for posting this. We have this in Canada to but as far as I know it's not as prominent. More just dealers offering cash for clunkers. Shame on the governemnt, but not surprising AT ALL if you really look into it for what it is.

Take a look at this if you have the time. Very interesting, pertains to this in a way :
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It is my understanding that the cars were allowed to be partially parted out - the junk yards have 6 months to do it. I just don't think they could part out the engine. I'll look more into it.

ETA: The dealer will destroy the engine by replacing the oil with an abrasive solution, and then run the engine to destroy all lubricated surfaces.

The dealer then has to transfer the trade-in vehicle to a disposal facility that will crush or shred it so that it will never be returned to the road, although parts of the vehicle, other than the engine block and drive train (unless the drive train is sold in separate parts), may be sold.

The disposal facility must also certify that it will not sell, lease, exchange, or otherwise dispose of the vehicle for use as an automobile in the United States or any other country, that the vehicle will be crushed or shredded onsite within six months after the date of its transfer from the dealer, and that the vehicle will not be transferred to another disposal facility prior to being crushed or shredded.
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I hope so, I feel very strongly about recycle. However the news show I saw showed them putting the liquid into the engines and then they were gone straight to the crushing machine.
I wonder what the numbers would have come out if they would have given $3000 mini grants to families to do major repairs on the clunkers they had, that were paid for. No payments, American mechanics would get more work, Families would get breathing room before buying a new car, maybe a three or four years, who knows. Could make the difference between keeping their houses out of forclosure on some families, I'd think... Something to think about.
I participated in the cash for clunkers program. Does that make me a shmuck? I don' think so...

I traded in a 19 year old truck that was leaking antifreeze and oil like nobody's business. How much would it have cost me to get it fixed? Alot. Could it have gotten me back and fourth to college for 4 years? Probably not. If so, how much would it have cost me in gas going 100 miles a day at 14 miles to the gallon five days a week? Alot. Was my truck paid for? Yes. Is my new car paid for? Yes- because I had money saved up.

So, was cash for clunkers a good program for me? Yes. Enough said.
It's not a "bad for the environment acid." It's only dangerous in the original liquid form, or as a gas. When it dries, it is basically SAND.

Also the cars were parted out, only the engine was required to be destroyed.

Also, I looked into replacing my old Jeep Cherokee, and the new Jeep was being sold at a steep discount and Chrysler was also matching the $4500 incentive and putting up $1000 in cash ... so I could have gotten a $32k Jeep for about $18k when all was considered. I almost did it, but I only have 130k miles on the one I have, and I like to get 200k out of them if I can. Still, I would have come out ahead compared to what the OP stated.
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