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Cash For Clunkers - Is It Green or Green Backs?

Published May 27th 2009, 1:06am by Patty Streeter in Featured Articles

Old_car_flickr.com_photos_kb35_2289942750 The term "Cash for Clunkers" might sound familiar to you - it's a hot topic in the news and across the automotive blogs right now. Details: Two bills are currently under consideration in the House and Senate, each of them offering their own set of pros and cons. Unfortunately, as much as people are discussing them, nobody can decide on which is better or whether either one of them is actually any good at all.

Either one could be considered to be a bit like a government stimulus plan to get car buyers back to buying new cars. Both offer incentives towards the purchase of a new car when the shopper turns in an older model, but the value of the incentive is determined by the fuel economy of the new car.

As explained at Time.com, the bill being supported by Democratic Ohio Representative Betty Sutton, offers an incentive for the trade-in of any car from model year 2000 or earlier, without any restriction on fuel economy. Car buyers will receive $4,000 if they purchase a new domestic vehicle car that gets a minimum mileage of 27 mpg or $5,000 if it gets 30 mpg. (With all the numbers being bandied about, I'm not exactly clear on whether this is a combined city/highway figure, or if it is based entirely on highway economy. As we know there can be quite a bit of difference between the two.) The crux of this bill is that the new car must be manufactured in the United States, imports can qualify, but only if they're built here in the U.S., which would exclude the highly-touted 50-plus-mpg Toyota Prius hybrid, which is built in Japan.

Old_car_flickr.com_photos_mcgraths_2431579343 The other bill is supported by Democratic Representative Steve Israel and Democratic Senators Charles Schumer and Dianne Feinstein. This bill encourages trading in any vehicle with fuel economy of less than 18mpg. Its replacement can be foreign or domestic and must have fuel economy at least 25% better than the old car to qualify -- and rebates could reach up to $4,000.

The Specialty Equipment Market Association (SEMA), is actively opposing both efforts, because the vehicles traded in would then be crushed, turned into blocks of scrap metal and thereby removing its pieces and parts from the aftermarket, saying "auto restoration, customization and repair shops nationwide would suffer with the loss of older cars, trucks and parts they need to supply and service their customers," Steve McDonald, SEMA's Vice President of Government Affairs says.  "An unchecked Cash for Clunkers program risks destroying classic, historic, and special-interest vehicles. America safeguards its artistic and architectural heritage against indiscriminate destruction. Our automotive and industrial heritage deserves the same protection."

Even Edmunds.com has expressed "some serious reservations." According to CEO Jeremy Anwyl, "because this program aims to achieve both environmental and industry goals, it falls short of both. If the administration is serious about boosting car sales in order to jump-start the economy, it can do much better."

Old_car_flickr.com_photos_mcgraths_2431583107 One of the big aims of the bill's backers is to encourage people to buy new vehicles, since sales have been in the toilet. In an announcement shared through BusinessWire  Anwyl asserted that the program must be focused on attracting qualified new car buyers to the marketplace. The current proposal is unlikely to be of interest to typical new car shoppers since it offers only up to $4,500 for a vehicle that must be scrapped.

Paul Eisenstein, at TheDetroitBureau.com,  quotes a recent study that says these bills will "help the auto industry, boost consumer spending by $25 billion -- and yield huge benefits for the environment."  A well-executed program encouraging American motorists to trade in their "clunkers" for new vehicles could not only give a big boost to the auto industry but inject as much as $25 billion in much needed consumer spending into the troubled economy, according to the consulting firm, CSM Worldwide.

According to Time.com, "Whichever bill is chosen...a successful cash-for-clunkers program wouldn't be cheap," pointing to Germany's program as an example of a program that cost three times more than originally anticipated. "But a cash-for-clunkers program, whatever its environmental benefits, would provide the government with a way to aid the domestic auto industry without giving Detroit any more direct handouts."

Time is ticking down and a decision is due in Washington within just a couple of weeks. Keep your eyes peeled to see what gets decided. Maybe you'll be receiving just the incentive you need to buy a new car!

Old car creative commons photos courtesy kb35 and mcgraths  (twice)  via flickr


Jody-devere_president_askpatty Jody DeVere
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