Cash for Appliances is Coming – Hold Off on that Purchase!

by Darwin on August 21, 2009

Cash for Appliances, the sequel to Cash-for-clunkers (and now, the predecessor to cash for caulkers) is just around the corner.  The US Department of Energy will be unveiling the Energy Star Appliance Rebate Program, which is projected to be a $300 Million stimulus package meant to further stimulate the economy.  The government indicated that by fall, consumers will be able to partake in a similar cash for appliances program whereby refrigerators, washers and dishwashers will be eligible for tax rebates of up to $200.  If this program gets consumers to step outside the newly coined “New Normal“, then it should in theory, spur significant spending in the appliance arena.

Don't Buy Me Yet!

While this bodes well for anyone that was considering an appliance purchase, it’s questionable whether the size or the timing of the new cash for appliances gimmick will have a meaningful impact on the economy.  Personally, we constantly run out of space in our refrigerator/freezer, especially in preparation for a party.  So, with a nifty new rebate, we’ll be enticed to go buy a nice energy-efficient model and stick our existing energy-sucker in the garage for overflow.

Why run one unit when you can run two at twice the price?

Well, actually 1.5 times I guess, since the new units qualifying for the program are supposed to be more energy efficient (and check out this article on how to hedge energy prices with regard to your personal expenditures).  It’s also possible that you’ll be forced to turn in your old unit, but how this will be facilitated and tracked isn’t clear yet.  If your purchase is going to be driven solely be the desire to reduce your energy costs, make sure you conduct a rough Net Present Value calculation to really understand whether this investment in a new appliance makes any sense financially.

This latest handout is just another in a long line of poorly conceived ideas that sound good initially until the effects are fully digested.  So, here you have a program which is going to coerce people into delaying their appliance purchases for the next two months until this thing finally rolls out (great for the near term economic recovery effort), then there’s going to be a run on appliances and the program will run out of money prematurely.  Next, because Congress can’t say no to an opportunity to spend more taxpayer dollars, they’ll push through a quick modification to allow for more funding (is this sounds like cash for clunkers to you?) and before you know it, the $300 Million turns into $500 Million.

The net effect is that it leads to uncertainty in the near term because nobody knows what the administration is going to tinker with next, and the only thing that is certain in the long term is that our children will be forever paying the interest on our generational debt.  But, regardless of your beliefs on bailout after bailout and handout after handout, if you’re in the market for a new appliance, because you’re funding these rebate checks as a taxpayer, it’s worth waiting until the details are finalized in the fall before splurging.

Update: Details Emerge on State Cash for Appliance Rebates

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{ 2 comments… read them below or add one }

1 Cash For Appliances September 18, 2009 at 3:10 pm

Well I do see where you are coming from with the debt portion, but let’s face it, this country was in debt long before Obama. At least he is trying to fix an economic crisis unlike some of our past *ahem…Bush* presidents.

As for the short term effects it has already gained a lot of momentum on Wall Street in the metal industries (also sparked by cash for clunkers) so the ripple effect will catch on and by October 15th when these rebates roll out it will already have done its job without any actual incentives pushed out.

Thanks for the good article and allowing me to comment.

[Reply]

2 kathy October 3, 2009 at 12:48 pm

Well we are in alot more debt now and it is getting worse. Cash for ap pliances and cars are coming indirectly from each american also. I think we just keep getting more debt and less jobs. Lets not blame Bush anymore and lets look at what Obama has really ran up the debt and has not helped unemployement . More americans are out of a job now then ever in history and it is going to continue to climb. How nice of our goverment to use our tax money to give some people a little back. We can afford to buy new appliances when you do not have a job.

[Reply]

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