The Automotive Scrap Program

Posted July 9, 2009

I don’t know why we copy stimulus programs from countries whose citizens generally snub their nose at the notion of credit. I am referring to Germany. Let us look at several reasons why the “Scrap Program” may not work in Canada:

1.       Politicians and Automotive Lobby Groups have not done their homework nor have they measured the true impact of this proposal on the economy as a whole. Politicians have already given billions of dollars to lost causes – GM specifically. That money will never be repaid and the Canadian taxpayer has graciously allowed GM pensioners to enjoy money, for which Canadian taxpayers have worked extremely hard for. Get back our money before Fritz fizzles out and give every Canadian an equivalent pension stream instead – how many times do we have to pay incompetent automotive worker/executive pensions?

2.       Predators are waiting in the wings for this program to take effect. Ten year old vehicles typically carry very little insurance value & insurance premium and do require more frequent repairs. Have these groups done demographic studies of who owns these vehicles? Who are the predators and what should be done:

a)      Insurance companies who will rake in increased premiums and punish younger drivers, individuals with fines/accidents and newer immigrants. There must be a corresponding program to ensure individuals are protected.

b)      Will the Bank and the manufacturer financing institutions increase interest rates and reduce subsidies to unfairly benefit from such a program. Have these institutions agreed to interest rate controls? Will manufacturers increase the invoice cost of automobiles to achieve the same end?

c)       What percentage of 10 year old vehicles are domestic vehicles? What happens if the number is 80% and 60% of the new buyers purchase non-domestic brands? This would have a serious impact on domestic garages, domestic franchises and perhaps a devastating effect on North American parts manufacturers. Do we have the answers or are we playing Russian roulette? Let’s just keep “killing” small business in this country.

d)      Are we downloading more debt onto individuals who may not be able to afford these new vehicles? Will banks squeeze these people for additional “money down” and create further apathy in the market? After all, why are these people driving ten years old? They must be frugal or they are financially challenged!

e)      Does this mean that all levels of government will ban the sale of 10 year old vehicles, or are we just playing with ourselves? We have a program to eliminate 10 year old vehicles but this is a market where thousands of independent car lots thrive. I am no fan of that form of business, but what will be the outcome? Does this mean that organizations like OMVIC will have to re-write the rules? Will the Consumer Protection Act have to be revisited?

f)       This question intrigues me the most? Who gets the scrap vehicles and who will profit from their disposal? Could these vehicles re-enter the system and undermine the environmentally friendly benefits of the program? More questions with no answers.

I offer a simple program once more. Give “every consumer” a PST and GST tax holiday when they purchase a new vehicle. This way a nine or eight year old vehicle could be scrapped and everyone can participate in the economic recovery. Who knows, a one car household could become a two vehicle household. We should even consider a tax credit for used vehicles purchased whose manufacturer power train warranty is still 50% intact – mileage or time. This would attract individuals who are challenged by credit. Finally, any senior who purchases a new vehicle would receive a tax credit of $1,000.00 on top of the PST and GST tax holiday. The presumption is that many seniors hold more disposable income than most.

Thank you,
Joseph Pede