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The Pros and Cons of Appliance Cash for Clunkers

As a part of the American Recovery and Reinvestment Act of 2009, the Obama administration is rewarding consumers who purchase energy-efficient appliances with a program called the State Energy Efficient Appliance Rebate Program. The program is offering rebates of up to $200 for the purchase of energy efficient appliances, a very similar effort to that done earlier this year for the automotive industry.

The question is, “Is it worth it?” A new stove, refrigerator, dishwasher or air conditioner can cost hundreds of dollars, an expense that you may not have to take on right now. Is buying something new worth that kind of investment or would you just be better off hanging onto your old appliance and buying parts if it breaks down?

How it Works

Unlike the automotive Cash for Clunkers program you do not have to turn in your used appliance to receive a rebate. If you purchase a new appliance that fits the criteria for the EEA Rebate Program you simply fill out the paperwork, produce the receipt and receive your rebate. The amounts of each rebate are determined by the state, but you’ll receive federal dollars back. As of November 1 twenty-five states already had the program in effect.

The intent of this program is to encourage consumers to shop for new appliances that are more energy conservative but it is also designed to jump-start the economy. The predecessor to the appliance Cash for Clunkers kept the automotive industry afloat through a difficult economic period but it is still uncertain if it had any real benefit on the long term economic situation in the United States. Unemployment is still hovering at or over ten percent in most states and not projected to get better any time soon. Detroit, the home of the automotive industry, has an unemployment rate of nearly 30%.

In 2008, fifty-five percent of new appliances sold met the requirements for an Energy Star label. The AAE Rebate Plan will be available in addition to incentive programs already run by many states but there’s still no guarantee that the federal money will get people to buy new appliances instead of fixing their old ones. Homeowners in particular have already taken a financial beating this year and are not looking to spend where it’s not necessary.

The Potential for Fraud and Waste

The appliance industry has seen a nearly 25% drop across the board in new appliance sales over the past twelve months so they are hoping that this new incentive program will jump start sales for them. With that kind of pressure and the need for money to keep them afloat many appliance dealers will do almost anything to ensure that profits start rolling through the door again. This, unfortunately, leaves room for fraud and waste on a number of different levels.

It was widely rumored during the automotive Cash for Clunkers program that automotive dealers raised their prices before offering rebates to consumers. Uneducated buyers would purchase vehicles from these unscrupulous dealers and collect their rebate, thinking they got a good deal. In the long run they didn’t actually save anything.

With appliance Cash for Clunkers you also have the added problem of consumers who don’t have to trade in their old appliances. This will create an additional expense for the states if they choose to pick it up. Those old appliances need to be removed and disposed of. The federal bill has no provision to cover that and if the states don’t the consumer will have to. What good is a $200 rebate if you have to pay $250 for someone to haul out your old refrigerator?

Foreign Manufacturers and Domestic Unemployment Rates

“These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy and create jobs,” said the Energy Secretary Steven Chu when he announced the plan in July. “Appliances consume a huge amount of our electricity, so there’s enormous potential to both save energy and save families money every month.”

Secretary Chu should have done his homework before making this statement. Two of the largest manufacturers of appliances sold in the United States, Electrolux and LG Electronics, aren’t based in the United States. Their offices and manufacturing facilities are in Sweden and Seoul, South Korea, respectively. General Electric, once an employer of 25,000 people at Appliance Park in Louisville, now employs barely three thousand and has most of it’s manufacturing done in Mexico or Southeast Asia.

The appliance industry is not a major employer inside US borders and a boost in appliance sales will not significantly improve the jobless situation in this country. Automotive Cash for Clunkers was designed to boost the domestic auto industry and may have helped somewhat but American car companies need far more than just a few rebate dollars to solve their problems.

Whirlpool on the other hand, the world’s largest manufacturer of home appliances, has its global and North American headquarters in Benton Harbor, Michigan and manufacturing facilities in Fort Smith, Arkansas; Evansville, Indiana; Iowa (Newton and Amana); Tulsa, Oklahoma; Ohio (Clyde, Findlay, Greenville and Marion); and Cleveland, Tennessee. They employ nearly 70,000 people and will benefit domestically from the Cash for Appliances Rebate Program.

If you are going to take advantage of this program ask first where your appliance is manufactured. There are many quality brands that are made right here in the United States or at least in North America so if you’re going to do something to stimulate the economy at least make sure someone will get or keep their job because of it.

Why Not Just Fix the Old Appliance?

The appliances made in the past twenty-five years were designed to last a lifetime so if you bought a refrigerator or an oven any time after 1985 you might want to think about fixing it instead of junking it. That rebate check might look attractive on the surface but when you sit back and think about it is it really worth it? Consider the pros first so you know what the advantages are:

• You get a new appliance
• You get a check back from the Federal government for the old appliance
• You save a few dollars on electricity
• You might create or save a job for someone in the US

Now look at the cons:

• You’ll spend hundreds of dollars for a new appliance
• You have to dispose of your old appliance
• You may pay more than regular price after the retailer mark-up
• The job you create or save might be in South Korea

The cost of the part you need to fix your old appliance is far less than what you will pay for something brand new and the old one will work just as well. It takes just a few minutes to make most repairs and you won’t have to fill out paperwork and wait for a rebate check that will be spent long before it gets to you. Are there advantages to this new Cash for Appliances program? Of course there are. Do those advantages outweigh the headaches and expense? You can decide for yourself.

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