Hi Larry,
I also enjoyed your cash for clunkers article. This is in response to the comment you posted in the last blog. Someone mentioned "selling" all the clunkers causing sales of auto parts for repairs. My understanding was the opposite. All the cars had to be destroyed, thus less sales of auto parts and fewer repairs.
Conner
Conner, you are correct - they did have to be destroyed. We have yet to see the total impact. As you know, most of the sales were foreign cars. Thanks for your kind comment.
Larry Kopsa CPA
Showing posts with label Cash For Clunkers. Show all posts
Showing posts with label Cash For Clunkers. Show all posts
Friday, November 13, 2009
Thursday, October 1, 2009
COMMENTS ON CASH FOR CLUNKERS
I received the following comments from one of our regular blog readers. I thought you might be interested in his thoughts.
"Larry, always enjoy your blog and the good business tips.
Was surprised at the piece on the clunker program. I do not think that entire math was carried out.
If 700,000 cars were sold and they were driven 12,000 miles per year, they save about 320 gallons of gas per year. Did this give the drivers additional funds to spend in the economy which could go on for several years? 560 million for the economy?
Did the sales of the 700,000 clunkers allow for auto parts suppliers to move inventory, perhaps pay down debt or invest in expansion? Did the sales of the 700,000 clunkers cause recall of unemployed workers, removing them from unemployment payments? Were auto taxes paid on the new autos? I assume that auto dealers were able to move some inventory, perhaps pay down debt.
On the down side, I think that 3 of the top sellers during the program were foreign cars. I do not know what the US content of those cars might be. Just some rambling thoughts."
"Larry, always enjoy your blog and the good business tips.
Was surprised at the piece on the clunker program. I do not think that entire math was carried out.
If 700,000 cars were sold and they were driven 12,000 miles per year, they save about 320 gallons of gas per year. Did this give the drivers additional funds to spend in the economy which could go on for several years? 560 million for the economy?
Did the sales of the 700,000 clunkers allow for auto parts suppliers to move inventory, perhaps pay down debt or invest in expansion? Did the sales of the 700,000 clunkers cause recall of unemployed workers, removing them from unemployment payments? Were auto taxes paid on the new autos? I assume that auto dealers were able to move some inventory, perhaps pay down debt.
On the down side, I think that 3 of the top sellers during the program were foreign cars. I do not know what the US content of those cars might be. Just some rambling thoughts."
Wednesday, September 23, 2009
DO THE MATH...HOW SMART WAS THE CASH FOR CLUNKERS PROGRAM?
The government said that they passed the Cash For Clunkers Program to help save the environment and to make sure that we are not as dependent on foreign oils. Check out the math. Maybe I am doing the math wrong.
A clunker that travels 12,000 miles a year at 15 mpg uses 800 gallons of gas a year. A vehicle that travels 12,000 miles a year at 25 mpg uses 480 gallons a year.
So, the average Cash for Clunkers transaction will reduce US gasoline consumption by 320 gallons per year. They claim 700,000 vehicles so that's 224 million gallons saved per year. That equates to a bit over 5 million barrels of oil. Five million barrels of oil is about 5 hours worth of US consumption.
More importantly, 5 million barrels of oil at $70 per barrel (pretty close to the current price) costs about $350 million dollars. So, the government paid $3 billion of our tax dollars to save $350 million. We spent $8.57 for every dollar saved. How good a deal was that? They'll probably do a great job with health care though!! Hey - go figure!!
A clunker that travels 12,000 miles a year at 15 mpg uses 800 gallons of gas a year. A vehicle that travels 12,000 miles a year at 25 mpg uses 480 gallons a year.
So, the average Cash for Clunkers transaction will reduce US gasoline consumption by 320 gallons per year. They claim 700,000 vehicles so that's 224 million gallons saved per year. That equates to a bit over 5 million barrels of oil. Five million barrels of oil is about 5 hours worth of US consumption.
More importantly, 5 million barrels of oil at $70 per barrel (pretty close to the current price) costs about $350 million dollars. So, the government paid $3 billion of our tax dollars to save $350 million. We spent $8.57 for every dollar saved. How good a deal was that? They'll probably do a great job with health care though!! Hey - go figure!!
Monday, September 7, 2009
IS CASH FOR CLUNKERS TAXABLE?
Larry, I heard on the radio that we will have to pay taxes on the money from the Cars for Clunkers. If so, I am really mad because nobody said we had to pay taxes on it. Is this true?
Robbet
Robbet, let's get this cleared up. No, the discount is not taxable to you the purchaser. Of course, if this is a business auto you cannot claim depreciation on the discount.
A number of web sites and um, what’s the word, liars, opportunists, political wonks, media personalities, have indeed taken to the airwaves to try and stir the pot a little with respect to the CARS program. It certainly gets attention to scream that the program is some kind of secret tax-raising scheme. Only, they’re wrong. Think of it as a sale or discount: $4500 off! It’s not income to you, period.
Dealers are required to report the reimbursement from NHTSA as part of their gross income. This makes sense – they’re still grossing the same amount after the reimbursement. For example, if a dealer sells a $25,000 car to a customer for $22,000 ($25,000 less the CARS “discount” of $3,000), and the dealer next receives a check from NHTSA for $3,000, the dealer has still grossed $25,000. No harm, no foul. There’s no “extra” tax on the dealer, as has been reported. It’s the same reporting requirement as before.
But what about sales tax? In Nebraska they have ruled that the discount is subject to tax. Most states are not including the CARS portion for purposes of sales tax; there are a handful of states like Nebraska that are taking the position that the entire sale price, including the CARS portion, is subject to sales tax. You can check out which states are using this handy chart from Lexis. The good news?
It is a pleasure serving you.
Larry Kopsa CPA
Robbet
Robbet, let's get this cleared up. No, the discount is not taxable to you the purchaser. Of course, if this is a business auto you cannot claim depreciation on the discount.
A number of web sites and um, what’s the word, liars, opportunists, political wonks, media personalities, have indeed taken to the airwaves to try and stir the pot a little with respect to the CARS program. It certainly gets attention to scream that the program is some kind of secret tax-raising scheme. Only, they’re wrong. Think of it as a sale or discount: $4500 off! It’s not income to you, period.
Dealers are required to report the reimbursement from NHTSA as part of their gross income. This makes sense – they’re still grossing the same amount after the reimbursement. For example, if a dealer sells a $25,000 car to a customer for $22,000 ($25,000 less the CARS “discount” of $3,000), and the dealer next receives a check from NHTSA for $3,000, the dealer has still grossed $25,000. No harm, no foul. There’s no “extra” tax on the dealer, as has been reported. It’s the same reporting requirement as before.
But what about sales tax? In Nebraska they have ruled that the discount is subject to tax. Most states are not including the CARS portion for purposes of sales tax; there are a handful of states like Nebraska that are taking the position that the entire sale price, including the CARS portion, is subject to sales tax. You can check out which states are using this handy chart from Lexis. The good news?
It is a pleasure serving you.
Larry Kopsa CPA
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