The “cash for clunkers” bill passed the House yesterday, so it’s time to take another look at this badly  designed legislation. We’ve already explained why it’s poor environmental policy and ineffective economic policy and why it will hurt the poor. Now, with the help of The Cheapskate Blog, let’s examine what the clunker credit does for consumers.

The answer: not much. Cheapskate’s Brad Tuttle writes:

It’s not clear how the trade-in will affect the purchase price of your new car. Even after you’ve got the e-voucher ready, you’ll still have to negotiate with your car salesman for your new ride. And there’s no saying how this will change the negotiation process. Buying a new car gets more complicated when you’re trading an old one in, and it seems like the “cash for clunkers” deal will complicate things further.

Tuttle also notes that not every ancient heap will qualify. It must be drivable, less than 25 years old and covered by insurance for the past 12 months. It also must get less than 18 miles to the gallon, and you must buy a new car that gets at least 2 mpg more.

Also, if your gas guzzler is worth more than the credit ($4,500, at most), you wouldn’t benefit. That means we won’t be scrapping many late-model Hummers. My guess is that folks who are cheap enough to drive a clunker probably won’t take advantage of the credit unless it significantly overvalues the car. They know they’ll be burdened with sales taxes and financing costs, and will own a new car that depreciates as soon as you drive it off the lot.

That’s not to say the bill won’t stimulate car sales. It will, and it may make bailed-out Chrysler and General Motors a little healthier, temporariily.  Most likely, the trade-in incentive will merely move up some people’s car-buying timetable. Sales are likely to drop sharply whenever the credit expires.

As Freakonomics author Steven Levitt predicted last year, the bill also may create a boom for some fix-it shops. Levitt wrote:

Indeed, I suspect one of the most visible responses to this program will be a new market for mechanics fixing up cars that don’t run at all just enough so that they can be driven to the government’s lot to collect the cash.