After looking over this program I found myself asking the question “what were they thinking?”  Perhaps they were not thinking when the folks in the seat of government came up with this so-called brilliant idea.

Congress passed the Automotive Stimulus bill Cash for Clunkers for auto industry recovery in fuel efficiency.  Okay.

The program is called C.A.R.S. (Consumer Assistance to Recycle and Save Program) and will receive an initial allocation of $1B funded by the US government as a part of a War Appropriations Bill.  Chrysler has jumped on the banwagon offering to match the government paid vouchers.  Okay.

Here’s the poop on the program:

• Your vehicle must be less than 25 years old on the trade-in date
• Only purchase or lease of new vehicles qualify
• Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
• Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in
• You don’t need a voucher, dealers will apply a credit at purchase
• Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
• The program requires the scrapping of your eligible trade-in vehicle, and that the dealer discloses to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

Okay, here we go.  I looked into the program because I thought about trading in my 1994 Jeep Grand Cherokee for a newer SUV — perhaps a hybrid — and found I could only purchase a brand new vehicle.  I have not purchased a brand new vehicle since a brand new vehicle I purchased years ago disappeared from in front of my house in a hail of burned rubber.  I vowed then — particularly after learning of the insurance repay for a car I purchased three months prior — that I will never purchase another new vehicle again.  Never.  It depreciates significantly once you leave the lot.

Okay, now you know the first thing I don”t like about the program, you cannot trade your car in on a pre-owned and cheaper than brand new car.

First things first.  RealtyTrac, the leading online marketplace for foreclosure properties, released its Midyear 2009 U.S. Foreclosure Market Report, showing a total of 1,905,723 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 1,528,364 U.S. properties in the first six months of 2009, a 9 percent increase in total properties from the previous six months and a nearly 15 percent increase in total properties from the first six months of 2008. The report also shows that 1.19 percent of all U.S. housing units (one in 84) received at least one foreclosure filing in the first half of the year.  With this information, one could say these 1.9 million folks are now faced with something called bad credit right?

Second, according to the Bureau of Labor Statistics, the number of unemployed persons (14.7 million) and the unemployment rate (9.5 percent) were little changed in June.  Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.2 million, and the unemployment rate has risen by 4.6 percentage points.  We can safely say 14.7 million people cannot afford purchasing a new car right now.  If they have a paid-for clunker, they’re keeping their paid-for clunker.

Added to the above, there are rumors of more layoffs in the future from Microsoft to Verizon and others.  This could increase the pool of unemployed people by as much as 5,000 to 10,000.  Who feels secure enough in their jobs to enter into an installment contract for a car costing $18,000 or more?

Are we having fun yet?  Let’s continue with credit card defaults.  Since the unemployment rate is expected to increase, many industry observers fear that industry’s credit card default rate could climb above 12% by the first quarter of 2010.  Already, Bank of America, the largest bank in the country, reported its default rate jumped to 13.8% in June from 12.5% in May.

And let’s talk about the credit market.  Last I heard that was still on lockdown.

The folks in the seat of government have apparently lost their cotton pick’n minds!  Who is interested in purchasing a brand new car now knowing — particularly if they are members of the above group — the finance charges for these brand new cars will be nowhere in the range of 5%.  It is more likely the finance charges — if they can get financing at all — will be somewhere in the double digits making that $4,500 a moot issue.

I journeyed over to Kelly’s Blue Book to find out if my old Jeep qualified as a Grand Clunker and of course it did making me eligible for, in some cases, the full $4,500.  I have carried insurance on my car for a full year (a prerequisite) and the car is drivable (another prerequisite).  My combined (whatever that is) fuel economy is 15 MPG.

Next, I selected SUV and because I’m cheap, I moved the Price Range Scale to $10,000 to $25,000.  When I discovered I could not purchase a slightly used car (2008 – 2009), I was done but I ventured on for the exercise.  A newer Jeep Patriot runs from $18,170 to $24,610.  There was one 4WD with a manual transmission (do not want) for $19,920.  There were no automatics in the group and beyond that one lowly 4WD, everything else listed were 2WD.

Moving on.  I found one — count ‘em — one Jeep Liberty listed.  Fortunately, it was an automatic but it was a 2WD.  Price for this piece-o-crap is $23,760.  Okay.

The fuel economy Jeep Compass — 25 MPG — ranges in price from $19,095 to $23,455.  My options were all manual transmissions (again, me no want), and only one 4WD listing at $20,845.

When I slid the price gauge to $35,000, up jumped a Grand Cherokee Laredo for $31,230.  That Laredo is a 2WD automatic but the price — forgetaboutit.  It didn’t get better for the Patriot, Compass or Liberty.

Bottom line, these cars are too rich for my blood.  I’ll take my Blue Book trade in value of $1,775.00 and will trade it in on a better than average used Jeep Grand Cherokee.  I found plenty of them going for under $15,000 and they have everything my current Grand Clunker has if not more — 4WD/AWD, premium sound, power everything, automatic, etc.  Why would I trade in my paid-for Grand Clunker — with more bells and whistles than the aforementioned pieces of crap — for a car note and higher insurance on something that is not what I want?  I won’t do it and I’m not a member of any of the above groups — yet — and that’s the rub, I could be at some point down the road and again, why would I do something so foolish for a dangling government sanctioned rabbit wearing a banner “Cash for Clunkers.”

My Clunker is PAID FOR.  It’s mine.  I have the pink slip.  My insurance is low because it’s an old Jeep Grand Clunker.  Why would I do that to myself.  Clearly the government is making room for another credit fiasco to take place sometime in the future.  I don’t know about you but I’m closing my eyes.  I can’t bear to witness another economic disaster which will hurt even more people by strapping them into new cars by dangling a brand new rabbit (and I don’t mean VW) in front of them.

This program is simply crazy.