From the Laurel Leader Call:

But, there’s a state law that says I have to have collision insurance to operate a car in Mississippi. The federal government also requires those that live in the flood plain to have flood insurance. Removing that exemption would contribute to substantial savings.”

According to insureme.com, Gene Taylor’s assertion that Mississippians are required by state law to carry collision insurance is simply not true. Your lender (if you have a lender) may require you to carry collision coverage, but the great State of Mississippi only requires you to have liability insurance to operate a vehicle.

So why is that a big oops you may ask? Well, that kind of mistake could cost some families in Mississippi over $1500 per year.

The image above shows 2 different insurance quotes from esurance.com that an average family would expect to pay.

• The first quote is for a used 1987 Toyota Corolla that’s paid for. According to state law, you would only be required to carry liability insurance. The total cost is $89.42 per month.
• The second quote is for a 2010 Toyota Corolla that’s financed through a lender. According to state law you have to carry liability insurance. Plus, since you’re having to borrow the money to buy the new car, your bank will require you to carry collision insurance too. Your total cost for insurance is now $218.98 per month.

So, one of the added benefits of having a good used car that’s paid for is the fact that you aren’t required to pay the added cost of collision insurance. In this situation, Gene Taylor’s Cash for Clunkers scam would cost you an extra $1554.72 per year for the next 48-60 months.

Maybe Gene Taylor should’ve looked into the added costs of insuring borrowed money before voting to bribe hard-working folks to send perfectly good used cars to the scrap yard and take on more debt in a worsening economy with his cash-for-clunkers program.

In other words, it’s the government incentivizing folks to spend money on something that loses the bulk of it’s value as soon as you drive it off the lot, This, during one of the worst economies we’ve seen in a while and at a time when unemployment is over 9%.

In my opinion, the very idea of using taxpayers’ dollars to take perfectly good vehicles off the road and turn them into scrap metal is awful. But there are some very legitimate concerns by people in the auto industry as well.

According to the Automotive Aftermarket Industry Association (AAIA) there’s a lees intrusive way to boost the economy. The AAIA says that simple vehicle maintenance “would save consumers $30 billion in gasoline a year vs. spending $3 billion in taxpayer dollars to buy new cars.”

(AAIA) opposes the “Cash for Clunkers” program for the following reasons:

• The program destroys many vehicles that are not even close to being defined as “clunkers” with years of remaining life and use.
• Destroyed vehicles are removed from the market forever, depriving consumers who seek to purchase a used vehicle or charities in need of donated vehicles.
• It hurts the aftermarket companies that manufacture, distribute, sell and install vehicle parts on used vehicles, and those who rebuild/remanufacture vehicle parts.
• Resources and energy use is multiplied when a vehicle is destroyed and a new one is built to replace it.
• The majority of vehicles being traded in are domestic, and the majority of new vehicles being sold are foreign.
• The program entices consumers to purchase a new car that they might not be able to afford and certainly to go further in debt, reminiscent to the sub-prime home mortgage debacle.
• The program is regressive since only those at higher income levels who can afford to purchase a new car will qualify for the $4,500 voucher, while destroying used cars that could be purchased by lower income families, most in need of assistance in obtaining transportation.

The folks at Kelly Blue Book have some concerns as well. Recently they released a statement predicting “a likely bubble in used-car values, which could deflate as the Cash for Clunkers program comes to a close.”  In other words, as basic economics suggests, if you take up to 750,000 used vehicles out of the market, the price of used cars necessarily goes up in a serious way.

KBB’s senior analyst of vehicle valuation Alec Gutierrez had this to say:

If this bubble comes to pass, dealerships will end up with excess inventory of both new and used vehicles and be forced to offer deep discounts to remove surplus inventory, driving values down. Ultimately, there will be the possibility of a severe contraction in auto sales as soon as the Cash for Clunkers program runs out of funding.

Cash for Clunkers is a good example of how Gene Taylor believes the more our government intrudes into the free market, the better. Unfortunately, government’s intrusion into the free market, more often than not, leads to unintended consequences that will lead to more government intrusion later in order to fix the mess they created.