Want a new car? - Wait for the "Clunker Blip"

Ok. What do I mean about a Clunker Blip? It seems to me that as effective as the Cash for Clunkers program is, it is nothing more than yet another, perhaps faster paced, government sponsored sub prime mortgage. This time, tailored to cars.

Given human nature, with $3,500 to $4,500 added to their down payments, how many of the potentially 750,000 new car owners actually pulled the purchase trigger for inexpensive cars? My guess is that many, if not most people simply extended their purchasing power and ended up with car payments that exceed their appropriate income. (Certainly the car dealers are no more trustworthy than the mortgage loan officers of a year or so ago. 'If you breath, here is your car.')

I am not suggesting that the purchasers shouldn't have cashed in the old clunker. BUT, many have exchanged a fully functional, paid off car with only maintenance and gas costs for a newer car with a monthly payment and lower gas costs, not to mention increased auto insurance and purchase taxes. The difference in expenses vs payments and expenses STILL has gone UP, on the average!

I figure that if you wait a few months, the "ReproMan" will have visited a significant number of these car owner's homes in the middle of the night to reprocess their cars and the banks will be selling them at the auctions. (Auto repossession is FAR easier and faster than mortgage foreclosure.)

BUT, and here is the important part, these car's balance sheets have already received the $4,ooo +/- government credits PLUS whatever additional down payment the owners could added to the formulas. Factor that with the 20-25% loss due to instant, first year depreciation the banks are must anticipate and you should be able to purchase a couple month old $20,000 car for about $12,000!

So, sit tight and wait, and take advantage of the "Clunker Bump," especially if your car, like mine, is an environmentally friendly car and doesn't qualify for the current Cash for Clunker awards. (People just don't learn from their mistakes.)