How Cash for Clunkers Hurt Both the Poor and Small Business People

I am a big fan of used cars generally. I just can’t bring myself to buy a new one given the immediate depreciation which occurs once I wave goodbye to the salesman. It’s just too painful for me. I prefer to buy my cars used.

The secondary market is also important for those who can’t afford a new car. Given that 2013 autos average over $25,000, that’s true for a good number of American families. The total amount paid of course, depending on the interest rate, is in the end a whole lot more than $25K too. The used car market is a key (but often overlooked) part of the economy, and a vital resource for millions of people.

Cash for Clunkers decimated this market because it took many functioning (and paid for) older cars off the road, while at the same time it encouraged people to take on heaps of debt in the midst of the worst recession in 70 years.

Sadly this brilliant scheme didn’t work so well and many people who bought new cars could not actually afford them. To boot, the good used vehicles which remained in the market rose significantly in cost. Many Americans found themselves with a repo man in their driveway and suddenly priced out of a once affordable market.

I suppose if people wait it out enough repossessions will hit the street eventually that used car prices will again edge down. But it sure seems like a lot of pain to get nowhere, and way too much time on the bus.


First, the program destroyed approximately 750,000 working vehicles. They were crushed and sold for scrap metal, primarily to China. This created a severe shortage of affordable, reliable cars for folks like my customers who cannot afford newer, expensive cars. For independent dealers like me, the availability of used cars to resell diminished drastically, while prices skyrocketed.

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