Is the Cash for Clunkers Incentive inadvertently setting thousands of Americans up for personal bankruptcy?
Whether or not you are in favor of the Cash for Clunkers Program, it appears Congress is going to fund the controversial program at least through the end of August, but don’t trade in your current vehicle just for the sake of getting the rebate!
I have written many articles on the disadvantages of purchasing a new vehicle, with the most recent series detailing my purchase of a used Toyota 4Runner.
Remember, according to the terms of the bill, it doesn’t make sense (financially) to trade in any vehicle worth more than $4500 for the Cash for Clunkers program.
If you currently drive a vehicle with a fair market value less than $4500, there is good chance you own the vehicle free and clear without the burden of a monthly car payment.
Does it really make sense for you to trade your payment free vehicle in for an expensive new vehicle under the Cash for Clunkers program when you were otherwise managing with your current vehicle?
It’s hard to turn away free money, but lets not get delusional over Cash for Clunkers. My fear is the program is causing thousands of families around the country to purchase a vehicle they have no business buying no matter how large the incentive is.
According to Edmunds, a new vehicle loses 60% of its value in the first 4 years. With the average price of a new vehicle being purchased under the Cash for Clunkers program hovering around $20,000, participants are losing over $12,000 in depreciation when they othwise could have purchased a 4 year old vehicle like I did! This is not a good deal from the consumer’s prospective!
If you are in a position to comfortably purchase a new vehicle, this may be the a great opportunity! But if your financial situation is the least bit precarious, I would let this current government incentive drive on buy (sorry…I couldn’t resist the pun)!
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