The current economic climate is about as gloomy as it gets. With economic gurus arguing over whether we are in a really bad recession or depression, the time for some inspiring ideas has come. Here are two to get car sales fired back up again.
The news out of Detroit is staggeringly bad. Sales for February 2009 were down 41 percent compared to February 2008. Less we start badmouthing American companies, it should be clear that this is a world wide problem. Toyota sales are way down. Honda sales are plummeting. BMW sales figures make that sound a bomb did in old movies as it fell to the ground. It is bad all over, which means we need an effective plan to get things moving again.
The one thing we don't need to do is give companies like GM money. Pushing money into these companies keeps them afloat, but it doesn't solve the problem. It is like giving a gunshot victim repeated shots of morphine. Yes, they feel better, but they are still bleeding!
The way to solve the crisis in the car market is to create irresistible incentives for people to go and buy cars. President Obama started down this road by including a tax deduction for any sales tax paid on a car purchase in the stimulus bill. While being allowed to deduct sales tax is nice, it isn't nearly enough.
The first step that should be taken is to modify the tax code to state that the interest paid on car loans is tax deductible. This is exactly what we do with the interest on mortgages. Creating such a sizeable deduction would definitely entice a lot of buyers back to the dealers' showrooms.
The second step that should be taken is to create a trade in tax credit or deduction. If a person trades in a car over "x" years old to buy a new car, they should get a tax benefit. Again, we are getting people back into the dealers. The more this occurs, the more the companies will begin to heal.
Finally, we need to back companies that provide car loans. Getting people interested in buying doesn't mean much if they can't get loans for cars. The government can set the minimum requirements that must be met for car loans and then agree to guarantee anything above that. This will get the banks and lenders back into the game since the risk will be gone.
If we take these three steps, we motivate people to buy cars again and provide them with the money to do it. Instead of throwing good money after bad to keep the car companies afloat, we actually spend money fixing the problem. Once the car market is healthy again, we pull back on some of the more costly aspects of this plan down the road.
Dirk Gibson is with http://www.dcjautoparts.com - get inexpensive auto parts and accessories for your car.
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