Cash for clunkers revs closer to reality

To help rejuvenate the car industry, Congress wants to offer incentives for owners to trade in their old gas guzzlers for new cars that get better mileage. (See Managing Editor, Autos, Jon Linkov on the CBS Early Show.)

This week, the House passed the measure 298-119.

As it is currently structured, the plan would give vouchers worth $3,500 to anyone who trades in a car that has a combined EPA rating of 18 mpg or less on a new one that has a combined EPA rating of 22 mpg or more. If the old vehicle is replaced with a new one that gets at least 10 mpg more than it does, the voucher would increase to $4,500. (You can find EPA fuel economy ratings on cars back to 1985 at fueleconomy.gov.)

Trucks and SUVs are eligible for vouchers if they get no more than 18 mpg and are replaced with a vehicle that gets at least two mpg more than the old one. The voucher would increase to $4,500 if the new vehicle gets four mpg more than the old one. Other provisions apply to larger medium-duty work trucks.

Dealers would have to verify that the old car will be crushed rather than resold. Since the old vehicles would have to be scrapped, dealers wouldn’t offer any trade-in money. So in reality, the provision would only make sense for vehicles worth less than $3,500.

Based on a similar measure in Germany, the Obama administration anticipates the measure will increase sales by up to one million vehicles in the next year. That would provide a much-needed boost to the ailing auto industry, which has seen sales drop more than 30 percent this year.

Now the Senate is poised to take up the measure, and may try to include a provision for vouchers to buy used cars as well as new ones. Senator Dianne Feinstein has raised concerns that the House bill does not take an aggressive enough stance to encourage the purchase of fuel-efficient cars. She and several other Senators recently introduced their own bill that they say would achieve 32 percent more oil savings than the House bill.

While the measure is designed to help ailing U.S. automakers, we found most of the new models we’d recommend as replacements are made in Japan. In addition, the difference between the voucher value and the transaction price for a typical new car may mean many qualified participants need to finance $20,000 or more for that new vehicle.

Still, few Americans wouldn’t support getting some older gas-guzzlers off the road and jump-starting the auto industry. For more details on how the bill works, you can download the fact sheet in PDF format.

—Eric Evarts

Read our previous report "Congress reaches compromise on cash for clunkers bill."
For more information on the Cash for clunkers program, see our guide.

Comments

[Jon]

I'm thinking that this bill has put a lot of potential new-car buyers on the fence (me included). I could be eligible for a $4500 voucher; KBB and NADA say my van is worth roughly $4000 and the four dealerships I have been working with (Chevrolet and CarMax) won't offer me more than $2000 (I know there are a lot of variables in there, but the van is in excellent condition). The voucher would certainly give me a little more leverage.

[Andy]

Sorry, but this program is completely lame. What is the point of punishing people who always drove fuel-efficient cars, but would now like (or need) to trade up to a new one? If the main goal is to pump up the economy, why not let anyone with an old car take advantage of the system?

Why are there still special incentives to get a thirsty SUV? An SUV that merely gets 20 mpg and is thereby eligible for an incentive, unlike a car, is still extremely thirsty.

In Germany, anyone with a car that is 9 or more years old can get the €2,500 bonus. Because the German government has long realized that the ONLY way to get people to make reasonable choices regarding their personal mobility is a gas tax, people here automatically tend towards fuel efficient vehicles for the sake of their own pocketbooks.

If the government were really serious about "change," they would introduce a $2/gallon gas tax (and make it revenue neutral by cutting payroll taxes), and stop using ineffective, indirect programs like cash for clunkers and CAFE.

[mk]

I own a 1986 chevy caprice classic that is supposedly rated at 16 city and 23 hwy, but average about 18 to 19. If the average of the city and hwy. is 19 to 20, I do not qualify even though I might see 19 at times? The car runs, although, pollutes the air with obnoxious gases/fumes and still will not qualify for 4500 bucks simply because it gets 19 mpg average instead of 18. You'd think it should qualify if the govt. wants me to buy a fuel efficient dinky 4 cylinder engine car that would not stand a chance in a head to head collision with my caprice. I'd consider it for 4500 bucks since no dealer in their right mind would give me more than 1500 bucks trade in.

[Lem]

Is there anything written in the measure that prevents us from buying a gas guzzling clunker today, parking it for a year, then buying a new Prius in July 2010 and receiving the $4,500 voucher then?
The measure is for ONE YEAR; starting August 1, 2009, correct?

[karen]

Is it possible to use both the cash for clunkers money AND the $8,000 tax rebate money on the purchase of a new car? What are the deadlines for the two programs?