Tech Tips - Gas Prices Rising - Fight Back With Better MPG

There has been a LOT of talk in the news lately about the popular CARS (Car Allowance Rebate System), better known as the Cash for Clunkers program. Some folks love it, others aren't so sure it's a good idea. In this tech tip, we look at some of the pros and cons of the program and some things you might want to consider when deciding if it might be right for you.

First, you can visit this website to see if any vehicles you currently own would qualify: www.cars.gov There you will find much information including which vehicles qualify, a handy FAQ section and an overview of the program. You can even read the actual law and amendment recently added.

Some advantages of the program

There are several key benefits offered by the program. These include:

You could get 3,500 to 4,500 credit toward the purchase of a new leased or purchased qualifying vehicle even though your trade-in is worth much less.
You will be driving a much newer vehicle that should need fewer repairs and get better gas mileage.
Your newer vehicle may have more modern safety equipment.
Under the right conditions, the program could help you afford a vehicle you might not be able to drive otherwise.

Some disadvantages of the program

There are several potential drawbacks to be considered.

You will have a new car payment or will have to pay the balance of the purchase price at the time of the sale. This may more than offset the small annual savings on fuel in your new vehicle. A new car payment may not be wise in the current economic environment. If you lose your job, you could lose your new car to repossession if you fail to make payments, whereas your old car might have been paid off already.
Your cost to insure the new vehicle will likely be more.
The most popular vehicles purchased under the program are in short supply. You may not be able to get the color or features you want and may not even be able to get the model you want.
Newer vehicles are more expensive to repair once the warranty period expires.
Your old car or truck must by law be fully disabled shortly after trading it in. This means key parts like the engine will not be able to be used by anyone else and doing this could effect the aftermarket salvage parts business over the next several years. What will young kids be able to afford to drive if old cars are destroyed and not kept in the market?
Encouraging people to buy new cars before their old ones wear out pulls demand forward. Those who would have bought cars several years from now are instead being encouraged to buy them in the next several months. This may have long-term negative effects on our economy.
Although the original bill was sponsored by the Senator from Michigan, most cars being sold under the program are imports. The program is not driving demand for American vehicles as originally intended.

Alternatives

So you don't own an eligible vehicle or just plain decided the CARS program isn't for you? Good news! There are alternatives.

Consider an average new car payment of $300 per month not including insurance. Over a year, that is $3,600 out of pocket. If you qualified for the $3,500 credit under the program, you used up all the savings in the first year alone.

Now consider if you decide to just keep your current vehicle. It's unlikely it will cost more than $300 per month to keep it running. A good auto parts store like Carters will run seasonal sales and promotions to help you save even more money on preventive maintenance and repairs.

Instead of blindly taking advantage of the government programs that come along, it is important to "run the numbers" and see what is actually best for you in your specific situation. Perhaps investing a little money in your own "clunker" is the best way to save lots of cash for you and your family!

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