Money Matters - Simplified

Cash for Clunkers no panacea, charities adversely affected

Not only does the cash for clunkers program mean lesser cars for charities, it also means that the cars that these charities will get will be in worse shape and will fetch less money.

New York, August 9: The Cash for Clunkers program was a reason to smile for many. On a macro level, the entire U.S economy got a boost when its ailing auto sector reported a spike in sales.

Using the Cars Allowance Rebate System (CARS), the government killed two birds with one stone.

On one hand, they brought the consumers back to the auto showrooms and made them spend money, sans the rebate of course. On the other hand, the administration ensured that the old, low mileage clunkers made way to the new, more environment-friendly hatchbacks.

An economist will also tell you how much it affects the foreign exchange reserves of a country favorably when you burn less gas and, thereby, import a reduced amount of fuel.

On the micro level, the auto manufacturers, the dealers, the auto part suppliers, and the vendors benefited from increase in business. The customers reaped the advantage of rebates that ranged from $3500 to $4500.

Reduced donations for charities
However, amid all this optimism, charities that rely on vehicle donations for funding have no reason to rejoice. The answer is not too far to seek. The potential donors went ahead and traded their old cars for new ones under the CARS program.

The program is thus a crushing blow for charities which use car donations to generate capital for their operations. Mission Solano in Fairfield is exactly in this business. The cars donated to them are sold off to provide funding for the mission.

Mission's director, Raymond Courtemanche, said of the present scenario, "We've seen a huge, about a 40% decrease in vehicles that's come onto our lot so it's having a significant impact."

Courtemanche added, "You can't compete with someone who is buying them for $4500, you know you can't compete with that so we've become a competitor with our government."

The story of Dallas-based charity, Texans Can, is no different. The charity serves at-risk teenagers and their families. Texas Can has reportedly lost $75,000 to the clunkers program.

John List, an economics professor at the University of Chicago opined, "It is logical that many charities would be hurt. But it's intuition right now. All the experts are guessing."