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September 2, 2010
Used car prices spike in wake of Cash For Clunkers
Call it a predictable but unintended consequence (at least one assumes it's unintended) but a year after the government's highly touted Cash For Clunkers program, supply is down, prices are up, and the losers are those who can least afford it. As reported by Edmunds Daily:
Car buyers on average paid $1,800 more for a used vehicle in July than they paid a year ago at this time, according to Edmunds.com data. That's a 10.3 percent increase, bringing the average cost of a 3-year-old vehicle to $19,248. "A lack of confidence in the economy is driving more people to used cars, putting upward pricing pressure on a limited supply of vehicles," said Joe Spina, a senior analyst for Edmunds.
Spina said that at this time last year, a troubled economy had consumers buying less expensive fuel-efficient vehicles and trading in "gas guzzlers" through Cash for Clunkers (formally known as the Car Allowance Rebate System). "Now, those who need trucks and SUVs are buying them and in many cases are turning to used vehicles as a way to save money," he said. "Prices are high because this demand comes at a time when inventory is low as a result of the current shortage of lease returns and trade-ins for vehicles of this type."
In other words, there was real and rational demand for the cars that the Obama administration sent to the grinders. By destroying a quarter's worth of trade-ins in three weeks and permanently taking them off the market, the Obama administration has forced an artificial inflation by supply restriction. Moreover, they did so by subsidizing new-car sales that would have occurred anyway, eating up three billion dollars in taxpayer money.
Little more needs to be said, save that this is one more bureaucratic outcome that's predictable. The HAMP program is an equal opportunity disaster, the Patient Protection and Affordable Care Act a train-wreck, and the United States Post Office is deep in the hole. What next?
Greg Halvorson is the founder of Soldiers Without Boots, and hosts Freedom Warrior Radio on Blog Talk Radio.