"Cash for Clunkers" Has Unintended Side Effect -- Nonprofits Hurting

In a case of unintended side effects, it looks like the highly successful "Cash for Clunkers" program, pushed by President Barack Obama and his Administration as a bailout for the ailing car industry, is hurting a small piece of the economy.

The "Cash for Clunkers" program is pulling cars away from the nonprofit organizations that have been relying on them to help with their funding or using them to provide the needy with transportation.

Under "Cash for Clunkers," the cars sent cannot be in serviceable condition or as one dealer has said they have to put the car out of commission before it is sent out to the crusher.

Before "Cash for Clunkers," vehicles that could have helped to fund nonprofit programs or provide transportation to needy families are no longer available.

Take, for example, Mass. Adoptive Resources, whose director, Janice Halperin, was interviewed by WBZ-TV News, in Boston.

According to Ms. Halperin, director of Mass. Adoption Resources, her adoption organization has noticed about a 10 percent drop in clunkers. She indicated that in the past these vehicles could have been fixed up and used by the needy or sold to help fund her organization. Instead, they are no longer available.

The way cars are being canceled is also very detached or cold. For example, Ms. Halperin noted that Mass. Adoptive Resources was promised an SUV, however, that the owner reneged via email, noting that he was opting for the $4,500 voucher.

A spokesman for the Mass. Salvation Army noted the same trend. He indicated that cars that could have been used to help needy families are not available anymore.

This is a story that is being repeated across the country.

In Chicago, a CBS affiliate interviewed the owner of a tri-state auction where many of the vehicles taken in by charities were sold. These sales helped to fund their operations.

Tom Crane, auction owner, told CBS that his charity auction sales are running on empty.

He also noted another unintended consequence of this program: many of the small, used-car resellers, who used to buy "clunkers" and then fix them up for resale to people who need lower-cost transportation are finding that the "clunkers" are not there anymore. They are also running on empty.

Crane speculated that it is rather easy to see why people are opting for the "clunkers" program.

"I think many people are turning (out) of the program because they can get more money," he noted.

For example, "if they donate, they're going to get a $1,000 break from their taxes and then they look at the program and know they can get another $3,000 for their vehicle from the program versus $1,000 in taxes. That's enough to cause folks to go for the 'Cash for Clunkers.'"

The LA Times has reported in an Associated Press story that shows the depth of the hit to the non-profit sector. According to the AP story, one Texas-based nonprofit has already lost $75,000 in missed vehicle donations. In some cases, the cars could have been fixed up for the needy.

Instead, "Cash for Clunkers," cars have to be sent to the scrapyard in a nonoperative condition.

So for all its assistance to the auto industry, "Cash for Clunkers," is have some unintended side effects.