Cash for Clunkers--Who Got Snookered?

So, you took FEDZILLA up on its offer of $4,500 to trade in your old "Clunker" (interesting choice of words)? Well, let's see who got the best of that "deal"... If you traded in a clunker worth $3,500, you got $4,500 off for an apparent "savings" of $1,000. You could have gotten $3,500 if you had just traded in the car. So you really are $1,000 ahead (depending on your clunker's value) at this point. Not too bad... However, you WILL have to pay taxes on the $4,500 come April 15th (something that no auto dealer [or Fedzilla] will tell you). If you are in the 30% tax bracket, you will pay $1,350 on that $4,500. So, rather than save $1,000, you will 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, trading in a "clunker" that was costing you less to run than the payments that you will now be making. Even if you save $1,000 dollars a year in gas due to better mileage, you're still gonna be in the red for five years....hello? But wait, it gets even better: you also got ripped off by the dealer. For example, the month before the "cash for clunkers" program started, every dealer in LA for instance was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500 because competition was stiff due to poor sales from the stalled economy. When "cash for clunkers" came along, they stopped discounting them and instead sold them at the list price of $15,500. So, you paid $3,000 more than you would have the month before. Honda, Toyota, and Kia played the same list price game that Ford and Chevy did. Now let's do the math .... You traded in a car worth: $3,500 You got a discount of: $4,500 --------- Net so far +$1,000 But you have to pay: $1,350 in taxes on the $4,500 Net so far: -$350 (that's minus...in the red) And you paid: $3,000 more than the car was selling for the month before ---------- Net Loss: -$3,350 We could also add in the additional taxes (sales tax, state tax, dealer prep, etc.) on the extra $3,000 that you paid for the car, along with the 5 years of interest on the car loan; but let's just stop here while you kick yourself. Suffice it to say that those costs will be much higher than any savings you get from "better mileage". So who actually made out on the deal? FEDZILLA collected taxes on the car along with taxes on the $4,500 they "gave" you. The car dealers made an extra $3,000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. Manufacturers got to dump lots of cars they could not give away the month before. Lots of good or repairable used cars got taken off the market, crushed and sold as scrap metal to (ready for this?) CHINA (Look it up...). Or just as likely, it was surreptitiously shipped to Old Mexico for resale. The poor consumer got saddled with even more debt that they cannot afford. FEDZILLA'S merry men (who promised that people making less than $250,000. would pay "not one red cent more in taxes") will make millions in new tax revenues after convincing Joe Consumer that he was getting $4,500 in "free" money from the "government". In fact, Joe was giving away his $3,500 car and paying an additional $3,350 for the privilege. This is Chicago politics gone global...with an agenda. If you find errors in this math, please let me know...being a simple guy, I'm always willing to learn new things; and if you took "advantage" of the Clunkers deal, I have some swamp land down in Florida that's for sale...besides, you hopefully get the point. I’m thinkin’ it is this kind of thinkin’ that got Doofus elected in the first place. Just sayin’…