The auto industry is jumping for joy over the “Cash for Clunkers” program. The program has dealerships across the country scrambling to find supply to fill the demand. The Wall Street Journal recently reported that Ford Motor Company expects its first year-over-year monthly increase since 2007. It’s no doubt that this program is bringing out the buyers, but is it good for the consumer?
While this cash incentive can really help stimulate auto sales, it may not be stimulative for some folks’ bottom line. The reason for my concern is that the program may incent a buyer to overspend. Overspending and greedy behavior is what drove us into the economic mess in the first place.
I recently had a client take full advantage of this plan. He found a car that satisfied the CARS requirements and stayed within his budget. It worked wonderfully, and he saved $4500. I love it! But, problems can occur when the opposite happens. A buyer looking to pick up a $15,000 car but walks away with a $35,000 car over bought. No matter how you draw it up, sugar coat it, or justify it, overspending is overspending.
I often tell clients not to purchase something just for a tax deduction. I can now tell clients not to buy something just for a rebate. If a new car is needed and the funds are in place, this is a wonderful deal! Be careful though, the last thing you want is a clunker wrapped around your financial neck.
