Paying $3,500 and crushing them all would be nasty, I'd project that parts prices would go through the roof, like $1000 for an alternator, everything quadrupling at least, new car prices would push to $20,000 because of initial demand, but they'd only have any value as long as manufacturer total warranty held, i.e. they'd be at the $3,500 level in 5 years, because if anything at all goes wrong it's probably a minimum $2000 parts bill, so depreciation would be quite chronic even for historically good in that respect marques. With 3-4K a year depreciation and high cost of financing a $20K car, this would put total ownership cost of the cheapest of vehicles into the $8,000 or so a year range before you put fuel in it. It would cause a short term temporary boom, then a spiral diving, wing shedding, crater making crash as everyone figures this out... basically making the potential customer base of the auto industry initially double, then exponentially crash as people fail to afford vehicles any more, the economy would likewise get driven so far into the ground, it would take better equipment than the latest they have for finding oil to see where it went.
That could get so bad, that with the black hole like suction of all the dealer networks going under, even the rich might not be able to afford cars any more. I'm serious, could Mercedes afford to maintain a nationwide network for it's remaining 10,000 customers? @ $500,000 a car it might just manage... but they better have huge tanks, probably only urban centers with populations over 200,000 could support a public gas station.
So if you're an ultra greenie that imagines that everybody could manage with bicycles tomorrow if someone just snapped their fingers to make it happen, this probably sounds like a good plan. To anyone with any rational thinking skills it sounds like a recipe for compounding economic uncertainty into economic idiocy and the fall of western civilisation.
I remember The RoadWarrior..To understand who he was, you have to go back to another time..the world was powered by the black fuel & the desert sprouted great cities..Gone now, swept away..two mighty warrior tribes went to war & touched off a blaze which engulfed them all. Without fuel, they were nothing..thundering machines sputtered & stopped..Only those mobile enough to scavenge, brutal enough to pillage would survive. The gangs took over the highways, ready to wage war for a tank of juice
To continue Roadwarrior's thought, this sounds like a good time to get into the bicycle biz.
Or motorcycles? Or maybe make more of those little 3 wheel cars that can be registered as a motorcycle so they bypass car regulations.
Like that dude in Jurassic Park said, 'life finds a way'
I also agree. Being able to purchase a car that runs for under $1,000 helps students and the poor be able to get jobs, commute to work and school, etc. Who's going to sell a car for $1,000 when they can give it to the gov't for $3,500? If you get paid $3,500 to scrap a car then the actual parts yards need to pay more than that for a car. Who's going to take a junk car to the junkyard for $200, when the gov't will give them $3,500?
Parts will go up, the price of used vehicles will go up, and the price of used parts will go up as well. Total vehicle ownership costs will skyrocket. Students & the poor will no longer be able to afford vehicles. More people will be on welfare. Is this what we want? Most of these cars aren't driven much anyways.
Take my Buick for example. Its 28 years old, and is very ugly and rusty. Prime canidate for this program. It runs extremely well, but in the 18 years I've had the car I've put about 80,000 miles on it. Taking this car off the road will not make a signifigant impact.
Once I have my $3,500 for crushing the car I now have to buy another. People selling used cars in the paper will want at least $4,000 to $4,500 for the worst cars. Say you have a car you want to sell. Why deal with the hastle of putting an ad in the paper, taking phone calls, and spending an entire weekend at home so people can test drive it? Its a big hastle. Take a little less, and crush it. This is not a good idea.
How about this..
What if I have a car that's nearing this mandatory retirement date? Would I spend money to keep it running good? Or would I save the money since it'll be scrapped soon and keep driving it even though it runs bad, pollutes, tires and brakes are worn to the point of being unsafe, and gets bad mileage? I won't have to worry about resale value, so where's the incentive to keep it running good?
Cash for Clunkers will encourage owners to let their vehicles become polluting, unsafe, decrepit wrecks.