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Last week, we looked back the Cash for Clunkers program weighing it on 3 different areas like,  economy impact, consumers view and environmental aspect. This week we flip the coin to look on the other side which adds lot of hurt feelings from many organizations including nonprofits.

Non-Profit’s Loss

Many Nonprofit organizations raise fund for their programs through car donations. They accept old clunkers, repair them with help of their volunteers and sell them to the low income people for reasonable price to make extra cash. These organizations share some mixed feelings about this program. Philanthropy.org reported, Cheryl Rios of Texas Can, a Dallas nonprofit organization that serves troubled kids, estimated the organization has lost $75,000 due to a reduction in car and truck donations.

Similarly,  Point Richmond’s Vehicle Donation to Any Charity has seen a 20 percent drop in donations reported on sfgate.com. A big dent in the $3 million the company usually raises from reselling donated old cars and distributes annually among 4,500 charities nationwide.  Car Talk donation which turns over its share to National Public Radio also hurt by this program. 

Car dealers Struggle

Old auto dealers got to make a living by selling the clunkers. They sell to lower middle class people with lower income who doesn’t have real credit depend on them dealers who sell cars for cash and personal credit. This program means fewer clunkers, and  possibly less cash for these dealers another story reported in Houston Chronicle.

About 750,000 cars removed from the market and sent to junk yard. That accounts for a 2 percent reduction in overall supply, which may create a bubble in used-car prices, according to Kelley Blue Book, which tracks car values. “It’s going to take some of the inventory away from people who sell basic transportation for lower income people.”“It will cause the price of our inventory to go up,” according to a old car dealer in Houston. The sort of increase can make a big difference for his customers, most of whom have an average individual income of less than $25,000 a year.

Many old auto car lots are often called as “note lot.” Note lot dealers pick through trade-ins that new-car dealers don’t want to sell. They repair them, clean them up and resell them at a markup to subprime buyers, who often pay a steep interest rate — as much as 20 percent — because of past credit problems.

“There’s still people who need these cars,” he said. “They need a ‘clunker.’?” The program puts an unfair burden on low-income car buyers, many of whom need inexpensive vehicles to get to work.

Repair Shops worry

The vehicles being mashed by government decree still have value, both as a whole and as parts. According to a repair shops, the clunker program could affect non-clunker repairs, too, by driving up the cost of parts.“The long-term implications are the shortage of good used parts. When you crush a car, you take away a lot of parts that have no effect on fuel economy.” That includes body parts and engine components such as alternators and starters. Used parts, like used cars, tend to appeal to lower-income customers who can’t afford new ones.

It is unneeded hardship as per many auto shop owners. In this economy, increasing the hardship on people struggling the most, those clinging to their jobs and stretching their budgets, isn’t a stimulus.

Dealers Frustration

Even dealers who celebrated this summer with great sales through this program have few things to say. It  was overly complicated, a nightmare to manage for dealers and difficult to understand for consumers. Many dealers worried about getting their money back from government and stopped offering this program. Small dealears funds got strapped when government took its own time to process the reimbursements churing lot of frustration. 

Was the cash-for-clunkers program a true success?

Short answer is Yes and No. With some creative marketing and dealing, dealers were evidently able to  convert many nonqualifying shoppers into the buyers of other new or used cars, a trend that created a sizable positive impact on sales as an indirect consequence of the program. Consumer spending edged up 0.2 percent in July with help of this program to boost the economy.

Many call it as more of a political stunt, psychologically satisfying but not economically meaningful. It’s been good for new-car dealers and the automakers, it’s tweaked the overall economy, and it may even help the environment a tad, but there were many hidden losers gone unnoticed by the government.  If we all can maintain our cars like the young lady tin this video, we don’t even have to create programs like this one. Don’t you think?

Sources – chron.com, sfgate.com, npr.org