The Palmetto Insider

The blog of the South Carolina Policy Council

South Carolinians Will be Paying More for Used Parts, too

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olds motor

Thanks to Cash for Clunkers, consumers can expect to pay more for used engines as well as used cars in the future.

Cash for Clunkers is not only going to drive up the cost of used cars for South Carolinians, but for some used car parts, as well, according to a report in The Charleston Post and Courier.

As part of the Car Allowance Rebate System, the federal program that offers individuals up to $4,500 to trade in their older vehicles for more fuel efficient new cars, dealers have to basically destroy the engines on old cars before passing them on to salvage yards.

That renders the engine block worthless and reduces the value of the used cars by more than half , according to the paper.

“Because the engines in these CARS vehicles have to be destroyed, that means 750,000 engines will be taken out of commerce,” Michael Wilson, executive vice president of the Virginia-based Automotive Recyclers Association, told The Post and Courier. “Basic economics 101, supply and demand, would suggest that the price of used, recycled engines is going to increase.”

Cash for Clunkers blew through nearly $1 billion in the program’s first week and Congress responded by putting another $2 billion into it last week.

But, as the Policy Council pointed out last week, the program is in fact a detriment to South Carolinians.

Multiple car dealerships in South Carolina have reported that used car prices are already extremely high because of a diminished supply of both new and used cars.

In fact, some used car prices are close to that of new cars. Which leads to the question: why destroy perfectly drivable cars – and perfectly usable motors – when prices are so high?

It’s simple economics. When you cut supply, prices rise.

The bottom line: If you’re going to be in the market for a used car or used engine in the years ahead, you’re going to be paying more, courtesy of the federal government.

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Written by Cotton Boll Conspiracy

August 11, 2009 at 3:30 pm

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