Cash for Clunkers Math

[LONGTOM]

Cash for Clunkers Math

I hope you didn'y fall for this BS!

LONGTOM



Ignore all the fuel savings, etc and just look at how the car buyer got taken to the cleaners:

If you traded in a clunker worth $3500, you get $4500 off for an apparent "savings" of $1000.  That is, you could have gotten $3,500 if you had just traded the car in.  So you just really are $1,000 ahead at this point.   

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 here 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

Net                                    -$3350

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 consumer got saddled with even more debt that they cannot afford. 

The governments merry men convinced Joe consumer that 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


LONGTOM

[Questor]

I was amazed at some of the cars that were traded in. Some were worth close to 10,000 dollars.

[LONGTOM]

Don't know what they were worth but I too saw some very nice ones with lots of good paets on them.
I know of one that was traded that had 4 new tires and almost a full tank of gas.
What a waste!
Some people just got to have what they think is a free handout from the GOV no matter what it cost them or us.


LONGTOM

[skifastchad]

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. 

Would you please look at the FAQ's on cars.gov and irs.gov before you post email forwarding rumors?

There is NO federal tax on the $4500.  There is only local and state sales tax on the full price of the new car.  The $4500 is not sales tax exempt.  It is NOT part of your income for state or federal income tax.

I'll go ahead and post the actual text of the law for the third time.

TITLE XIII--CONSUMER ASSISTANCE TO RECYCLE AND SAVE PROGRAM
Sec. 1302. Consumer Assistance to Recycle and Save Program-
(h)Exclusion of Vouchers From Income
(2)FOR PURPOSES OF TAXATION- A voucher issued under the program or any payment made for such a voucher pursuant to subsection (a)(3) shall not be considered as gross income of the purchaser of a vehicle for purposes of the Internal Revenue Code of 1986.

[DalesCarpentry]

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. 

Would you please look at the FAQ's on cars.gov and irs.gov before you post email forwarding rumors?

There is NO federal tax on the $4500.  There is only local and state sales tax on the full price of the new car.  The $4500 is not sales tax exempt.  It is NOT part of your income for state or federal income tax.

I'll go ahead and post the actual text of the law for the third time.

TITLE XIII--CONSUMER ASSISTANCE TO RECYCLE AND SAVE PROGRAM
Sec. 1302. Consumer Assistance to Recycle and Save Program-
(h)Exclusion of Vouchers From Income
(2)FOR PURPOSES OF TAXATION- A voucher issued under the program or any payment made for such a voucher pursuant to subsection (a)(3) shall not be considered as gross income of the purchaser of a vehicle for purposes of the Internal Revenue Code of 1986.

I can tell you this for sure. If you went to that web site the government now owns your computer!!!!!!!! Dale

[dukkillr]

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. 

Would you please look at the FAQ's on cars.gov and irs.gov before you post email forwarding rumors?

There is NO federal tax on the $4500.  There is only local and state sales tax on the full price of the new car.  The $4500 is not sales tax exempt.  It is NOT part of your income for state or federal income tax.

I'll go ahead and post the actual text of the law for the third time.

TITLE XIII--CONSUMER ASSISTANCE TO RECYCLE AND SAVE PROGRAM
Sec. 1302. Consumer Assistance to Recycle and Save Program-
(h)Exclusion of Vouchers From Income
(2)FOR PURPOSES OF TAXATION- A voucher issued under the program or any payment made for such a voucher pursuant to subsection (a)(3) shall not be considered as gross income of the purchaser of a vehicle for purposes of the Internal Revenue Code of 1986.

Be careful using facts around here... We're much more into passing off sensational rumor as fact (without checking into the validity), especially if it can be used to fit our political ideology. 

[LONGTOM]

Come on guys, do you really believe this stuff?
I took it as a joke, not fact and posted it to give you a laugh.
I guess you have to post in big bold letters that it is a  JOKE so no one will take it seriously.
Maybe some color will help!

If you are making enought money to be in the 30% bracket than I dought you would be driving a $3500 or $4500 clunker.

I did not go to the GOV web site.


LONGTOM

[Questor]

It's not a joke to the people who bought a car before they needed one and then realized that they are now $20,000 in debt after buying a new one.

[LONGTOM]

You are right on that part Questor.
That is why I said some people just got to have what they think is a free handout from the GOV no matter what it cost them or us.




LONGTOM

[GH1]

C for C was intended to help the automotive industry, which it did. It was not intended to help consumers or taxpayers. Anyone that thinks it's a good idea to spend $20,000 to save $4500 is an idiot. However, if you happened to need a car when this program was offered then good for you.
GH1

[nomosendero]

C for C was intended to help the automotive industry, which it did. It was not intended to help consumers or taxpayers. Anyone that thinks it's a good idea to spend $20,000 to save $4500 is an idiot. However, if you happened to need a car when this program was offered then good for you.
GH1

"anyone who thinks it's a good idea to spend $20,000 to save $4,500 is an idiot."   No doubt about it & is true at the micro level, but also anyone who thinks growing the deficit by offering gov. incentives will help the economy at the macro level will help the economy is also an idiot.

[Questor]

I was reading Bill Clinton's opinion on current events and he thinks the way to improve the economy is to create more government jobs. I guess his understanding of economics has not improved much in the past 15 years.

[skifastchad]

Sorry Longtom.  When you said "I hope you didn'y fall for this BS!", I didn't know if you were calling the CARS program BS or the rumor chain email about taxes BS.

And Dale, they don't own my computer.  I would bet my computer that posting things here gets you on a much higher-up government list than visiting IRS.gov .

[DalesCarpentry]

Sorry Longtom.  When you said "I hope you didn'y fall for this BS!", I didn't know if you were calling the CARS program BS or the rumor chain email about taxes BS.

And Dale, they don't own my computer.  I would bet my computer that posting things here gets you on a much higher-up government list than visiting IRS.gov .

If you logged onto car.com with your computer. Then yes they own your computer. Have a look. Dale[yt=425,350]<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/bWs12ccbOiE&hl=en&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/bWs12ccbOiE&hl=en&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>[/yt]

[LONGTOM]

Maybe I could have been a little more clear about what I was refering to.
No problem.
As the kids say "MY BAD" what ever that means!


LONGTOM

[GH1]

"anyone who thinks it's a good idea to spend $20,000 to save $4,500 is an idiot."   No doubt about it & is true at the micro level, but also anyone who thinks growing the deficit by offering gov. incentives will help the economy at the macro level will help the economy is also an idiot.
[/quote]

Absolutely.
GH1