Seattle Bubble

Just a quick comment on one aspect of Obama’s just-announced plan to “see the auto industry through these difficult times.” I’ll keep this brief since it has little to do with either real estate or the Seattle area.

Here’s a portion of the president’s speech:

…the IRS is today launching a campaign to alert consumers of a new tax benefit for auto purchases made between February 16th and the end of this year – if you buy a car anytime this year, you may be able to deduct the cost of any sales and excise taxes. This provision could save families hundreds of dollars and lead to as many as 100,000 new car sales.

[Clarification: Obama is referring to the tax break for any new car purchase (not just American-made cars) that was passed as a part of February's "stimulus" bill.]

Let’s just say that hypothetically I’m in the market for a car. For the purposes of this example, we’ll choose a fuel-efficient, American made branded car: the Chevrolet Aveo.

I have two choices:

1. Buy a new 2009 Aveo, priced at local dealers between $11,000 and $17,000. I get to deduct up to about $1,700 in taxes from my taxable income, and save approximately $425 on my 2009 taxes (at the most).
2. Buy a used 2007 or 2008 Aveo, priced at local dealers between $9,000 and $10,000. Save $1,000 to $8,000 compared to buying new.

Tough choice, isn’t it? Maybe someone can explain to me how this program is supposed to convince even one person that now is a great time to buy a new car.