Clunkers program could drive used car prices up

Call it basic economics - the law of supply and demand. Or call it politics 101 - the law of unintended, but glaringly obvious, consequences. Either way, the implementation problems and adverse effects of the relatively small Cash for Clunkers program might raise some doubts about the wisdom of having Congress involved in something a complex as Health Care Reform.

By Chris Woodyard, USA TODAY

Hundreds of thousands of "clunkers" headed for scrappers may cause already rising prices for used cars to head even higher, dealers and market analysts warn.

The popular cash-for-clunkers program, extended by Congress last week with $2 billion more in federal incentives, requires that all the old fuel guzzlers traded in are scrapped — not resold. That means up to 750,000 vehicles will never find their way into the hands of another owner. Many are at the end of their useful lives, but others, with years of life left in them, normally would be resold.

"Those are the cars that lower-income families need," says Geoff Smartt, owner of Smartt Cars in Caldwell, Idaho. (more)

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