Monday, August 24, 2009

Cash for Clunkers, Bad News for Repair Shops: "The Gov.t Is Using My Own Money to Hurt My Business"

Fairfax Times -- "Cash for Clunkers" is bad news for Bill Wiygul, whose family owns several automotive repair shops in northern Virginia. Starting with one repair shop in Alexandria in 1976, the family now runs four automotive centers, two in Alexandria and one each in Reston and Herndon.

Shortly before the CARS program was initiated, Wiygul’s family purchased some property next to its Herndon location and planned to expand that location. Business was booming, in part because of an economy that forced many consumers to hold on to their older vehicles and keep them up in lieu of spending much-needed money on newer models.

“We put $1 million into that location,” Wiygul said of his Herndon site. “And now the federal government is subsidizing my competition. It is the most infuriating thing I have seen in 30 years of business.”

Wiygul said that among his four locations, he has lost at least 20 customers, including eight in Reston. “They are telling me they are going with the federal program,” he said of his disappearing clientele.

Wiygul said he does not blame consumers for joining the federal gravy train, he just wishes his tax dollars were not being used to help them do it. “,” he said. “And the thing that really gets me is that they are clearly favoring one segment of the auto industry over another. And of course it is the segment that they have a vested financial interest in.”

As part of the federal bailout plan, the U.S. government has invested about $65 billion and currently owns approximately 61% of General Motors and about 10% of Chrysler. “It is a very slippery slope,” Wiygul said.

Others in the auto repair business are also feeling the pain. Roy Page, who owns Advanced Auto Tech in Newington, said his business has dropped off 25% since the inception of the “cash for clunkers” program. “The older cars that we used to see are just no longer there,” he said. “Customers are telling us they are going with the program.”

Wiygul says that because of the program, potentially viable cars are also being taken off the market, limiting the affordable options that those in the market for a used vehicle can choose from. “This thing will have consequences that no one has thought of yet,” he said.

“For example, newer cars have hidden costs to consider, such as higher insurance, more expensive tires, and car payments that will still need to be paid long after the program is a memory.”


HT:
First Trust Portfolios

Originally posted at Carpe Diem.


10 Comments:

At 8/24/2009 2:06 PM, Anonymous geoih said...

It's right in article one of the constitution: Congress shall have the power to pick all winners and losers.

 
At 8/24/2009 2:36 PM, Anonymous Anonymous said...

Government helps the few at the cost of the many.....Sugar anyone?

 
At 8/24/2009 2:56 PM, Anonymous Anonymous said...

The gov't has always chosen winners and losers; the Obama administration has done it with much more abandon than any other previous administration. (Rohm Emanual paraphrase, never let a crisis go to waste.) Maybe the many losers (non-union, non-gov't, independents who do not work for or are otherwise subsidized by the gov't) will figure this out and vote out some of the politicians who so eagerly went along with the choosing of the winners and losers; it usually works out that way, but takes an election cycle or 3 to show real impact. One can hope. As has been said on this blog's comments before, the first real "green shoot" will be the Republicans getting the ability to filibuster again and, thereby, slow down the Obama-Pelosi-Reid socialism train. The Democrats, with their big majorities, have definitely over-stepped; the country did not suddenly go from center-right to left in 2006-08, the country simply sent George Bush and his big spending non-republican Republicans a message, a mistake in my opinion but there is no doubt the Republican party very much needed a wake-up call and they got it.

 
At 8/24/2009 3:36 PM, Blogger OA said...

It'll be interesting to see if used car prices have continued their upward trend through August. Not exactly helping out the poor.

 
At 8/24/2009 4:09 PM, Blogger QT said...

OA,

Cash for clunkers is very popular with the middle-class and the UAW. Agree that clearly this policy does not help the poor by driving up the cost of used vehicles and auto parts.

In terms of a fleet of 250 million vehicles, the effect on the auto sector, the U.S. economy & the environment is minimal.

This is about politics not economics. For very expensive pork, it's hard to beat the real thing accompanied by a nice cabernet.

 
At 8/24/2009 10:17 PM, Anonymous Anonymous said...

Well, I'm middle class and I don't buy new vehicles at all. I buy a 2 or 3 year old and literally run it until the wheels fall off.

Even if I made an exception to buy a new car, none of my vehicles would qualify for CARS - they all get way too high mileage.

My manager at work bought a new car under CARS. Good for her, but bad news for me. Essentially, my taxes (and others') subsidized her purchase.

It was a great deal for the UAW - perhaps this CARS program was less about getting clunkers off the road and more about making sure those UAW unionistas stay in the Obama camp.

And once again the short term impact will be countered by a much longer period of malaise.

 
At 8/25/2009 2:39 AM, Blogger OA said...

Another thing this post points out is how hard it is for businesses to plan right now. You never know which day you're going to wake up and find some new legislation or program that tanks all your plans.

There's even some talk of extending the new home buy tax credit, a cash for appliances type program, and incredibly some people talking 2nd stimulus.

Might be low odds, but if you're in affected industries, do you dare throw a lot of money betting one way?

 
At 8/25/2009 10:33 AM, Anonymous Cars4Charities said...

Not only did cash for clunkers hurt auto repair shops, it hurt used car dealers and car donation charities. When it was first proposed, charities that operate car donation programs asked that they be given the c4c cars. Those cars in good shape would be repaired and sold or given to the poor. Those in bad shape would be junked. Under this method, none of the negative consequences of c4c would have occured.

 
At 8/25/2009 2:13 PM, Blogger 1 said...

"Under this method, none of the negative consequences of c4c would have occured"...

Ha! Ha!

Trust me, I'm not laughing at you and your situation, quite the opposite in fact...

There's something about Obama and charitable deductions...

Remember this back in March?

From the WaPo: Obama Defends Push to Cut Tax Deductions for Charitable Gifts

You're not alone C4C:

From yesterday's Examiner: Cash for Clunkers ends: Used car prices go up

'According to Kelly Blue Book, used car prices could rise 5 to 10 percent. That’s unwelcome news to the low-income families that typically purchase those cars. A USA Today article cites used car dealers worried about their future. Saleable used cars are hard to find. It’s worse now, and maybe bad enough to put those lots out of business'...

Maybe Obama just hates poor people...

 
At 8/27/2009 3:35 AM, Anonymous Ian Random said...

Cars4Charities, it's obvious that Obama would not want the used cars to be resold as high speed rail is better solution for the poor.


http://www.cnn.com/2009/POLITICS/04/16/obama.rail/

 

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