President Obama signs cash for clunkers bill

President Obama today signed the “cash for clunkers” law, now known as “Car Allowance Rebate System,” that has been touted as a key stimulator for the auto industry and an environmental aid. The law provides $1 billion in funding, with $50 million allocated for administration. The specific guidelines for the program will be revealed in the next 30 days, when the plan takes effect on August 1.

The CARS program is intended to encourage consumers who own an older, gas guzzler to purchase or lease a new, more fuel-efficient vehicle. In doing so, it is expected to give the auto industry a sales boost, while at the same time transitioning participating car owners to thriftier vehicles and thereby reducing national fuel consumption.

The National Highway Traffic Safety Administration (NHTSA) working with manufacturers, dealers, and recycling centers to develop the program specifics. Dealers will need to register to participate.

Car Allowance Rebate System basics
While the details are being finalized, the government has released some elements from the program, which have changed little since our previous reports.

To qualify, the trade-in vehicle must:

• have been manufactured less than 25 years before the date you trade it in
• have a “new” combined city/highway fuel economy of 18 miles per gallon or less
• be in drivable condition
• be continuously insured and registered to the same owner for the full year preceding the trade-in

To check the combined city and highway fuel economy, consumers are directed to fueleconomy.gov.

Leases on new vehicles are eligible, so long as the lease is for at least five years—a very long time for a lease. The manufacturer's suggested retail price cannot exceed $45,000. Used cars are not part of the program.

Purchased vehicles may be from domestic or foreign brands, through participating dealers.

The chart below spells out the scenarios, matching the trade-in and purchase to the credit. These funds would be applicable at time of purchase.

Car Allowance Rebate System

	Passenger car light-duty	Small truck	Large light-duty truck (6,000 – 8,500 pounds)
Minimum fuel economy for a new vehicle (EPA  combined)	22 mpg	18 mpg	15 mpg
$3,500 credit	Mileage improvement of at least 4 mpg	Mileage improvement of at least 2 mpg	Mileage improvement of at least 1 mpg or trade-in of a work truck.*
$4,500 credit	Mileage improvement of at least 10 mpg	Mileage improvement of at least 5 mpg	Mileage improvement of at least 2 mpg

*Trade-in must be at least pre-2001.

The government has launched a Web site to answer common questions at www.cars.gov , where the law pdf can be reviewed. For more information on the Cash for clunkers program, see our guide.

Read:
Cash for clunkers: Recommended cars that qualify for a voucher
Cash for clunkers: The best gas guzzlers to junk
Cash for clunkers bill cuts fuel consumption–running the numbers

—Eric Evarts and Jeff Bartlett

Comments

[Jtdcg]

This requirement does not make sense:
"have a “new” combined city/highway fuel economy of 18 miles per gallon or less"

I was interested to hear about this bill as I drive a late model (1993) Volvo with approaching 200k miles that is under almost everyone's definition a clunker....but not this one. Its combined fuel number according to fueleconomy.gov is 20 mpg so it doesn't qualify.

This program is wrongly slanted to those that have been guzzling gas (and lets them only improve slightly) Even though my top choices in new cars have combined of 28mpg or greater I can't take advantage.

Why not make this program an option for anyone that boosts their fuel economy XX% rather than have the 18mpg max. Especially since $3500 can be had by someone only moving 16mpg to 18mpg in a small truck or 18mpg to 22mpg in a car.

I wonder if this will stimulate anything.

[Jeff Bartlett - Consumer Reports]

>

The official language on that is a bit confusing. By "new" they are referring to the current EPA rating system, rather than the ratings that were on the window stickers when the so-called clunkers were bought new.

In other words, by today's EPA standard, a clunker must be rated no higher than 18 mpg combined.

And yes, the program aids those who chose a gas-guzzler.

[Willie]

This is a clunker of a bill. I have a Chrysler Concorde, 1994. I like the car, but it may be time to say good-bye. Little things starting to go wrong. So I went and checked combined mileage. Combined mileage is 19. It does not qualify. What is clear about this bill is that it is designed to sell Trucks and SUVs(Stupid Useless Vehicles).
I have a friend who is considering getting another car. He has a Civic with over 200,000 miles on it. Car smokes when starting up. Car does not qualify.
Clearly this bill is designed for people with the means and desire to trade in their large gas guzzler for a newer slightly less gas guzzling vehicle. Worse yet, it appears that newer cars and trucks qualify for the rebate. The so-called clunker polluting type vehicles that this bill is supposed to remove from the roads is not addressed.
New cars that get around 33-35 miles to the gallon on the highway, generally have a combined mileage in the mid-twenties, which is about tops for a gasoline only vehicle. For most older cars getting 18 gpm or less, qualification for a new car would be for the lower $3500. Do the people that write these bills not know what graduated means, e.g $1500, $2500, $3500, $4500, etc.
Congress and Mr. President, you have done some good recently, this Clunker Bill is not part of the good.

[Paying at the Pump]

There are problems with the bill, including that you can buy a vehicle worth up to $45,000. But as a teacher with 14 years experience making less than $40,000 (working summers) and driving a 1986 car rated at 18mpg combined but getting 12 in the city where I drive, because it was what I could afford, it is going to let me get cleaner, much more fuel efficient and reliable transportation to get me to my job. It was Congress, not Obama, who developed these guidelines. He has a bigger fight on his hands with healthcare and can't battle Congress on every front.

[Jim Cook]

Yeah, tell me about it. I have a 1991 pickup with 185K miles. A great candidate, but, it is rated at 22 mpg, so no dice. Sigh.

There had been proposals to allow any vehicle under current CAFE (Corporate Average Fuel Economy) standards or to require any new vehicle be above them, but that didn't happen. Double sigh.

[Andrea]

I have a 99 Minivan with 200,000 miles and it qualifys so I like this bill.

[Joe]

How about including a key part of the deal: Your trade-in vehicle must be destroyed so it can not be traded in for full trade value -- only scrap. It makes this program useless to all but those that own a car worth less than 4K. Think about it. You would only get $500 scrap value plus a $3500 credit - it's a wash. But for every dollar over 4K you're losing money.

[Mike H]

So I have to trade my old vehicle in? I suspect that dealers will screw me even more on the trade-in price now since I'm getting a credit on it. Is there any provision if I sell my old vehicle myself?

[Mike H]

Do I have to wait until Aug 1? Lots of juicy rebates right now on domestic cars.

[Mark R C]

This bill is just not good. One more time, lots of bluster, lots of talk and little intrinsic value. Another example of the Government micromanaging our lives. I have a car with 120K and has never met the government stated milage even though it is taken faithfully to the dealer mechanic. $50 million to manage this bill. Rediculous!

[Joe Moncada]

Buyer beware!

The bill states the dealer will apply credit, but as always, the buyer will need to negotiate the final price. So there is plenty of room for the dealer to adjust the final price.

There is the potential to replace dealer/manufacture incentives with the government incentive.

So you, the taxpayer, will be paying for a rebate that the car dealer/manufacture would normally offer.

I'm disappointed.

[Adam R]

You HAVE to turn your car in for this program (this is a response to the people who think a dealership can do anything fishy) and the car is destroyed (engine and transmission must be taken out and scrapped). The car cannot be ever used in the US again. If it is ever on the road again, the dealership (or perhaps the scrapyard) pays back the $3500-$4500. There is really no 'trade-in' process in this equation. If you qualify for the program, the dealership will give you $100-$200 for the value of scrap. Then you get a 'rebate' on the contract based on which amount you qualify for.

My guess is that about 10% of the people who think they're getting rid of their 'clunker' aren't going to qualify for it.

This will, however, stimulate the auto industry somewhat. There are suddenly a LOT of people in the market (or at least think they're in the market) for a new vehicle, and the more people that talk about it, the better (even if only a few of them buy, it's still more than are buying now!)

[Tom]

I don't see why this bill was ever passed, other than to add to the national deficit and devalue the dollar even further.

If the administration passes the climate change [tax] bill, gas price increases and utility cost increases with their ripple effect (increased shipping costs, increased food costs, etc.) will force owners of older gas-guzzlers owner to buy new vehicles anyway, just to be able to afford enough gasoline or diesel fuel to get to work.

[John Turman]

Im going to trade in my 97 Jeep Grand Cherokee (inline 6) for a Volkswagen Jetta TDI.

I dreamed of keeping the jeep forever and giving it to my son while he was in high school, but, it's falling apart and my daily 50 mile drive is costing a lot per month.

I expect gas to get expensive again. I'm hopeful that Algeoil makes it big in the U.S.

[denis golden]

Dont buy an American car. As all faithful CR readers know, they have made inferior products for DECADES. For Gods sake even the Koreans are makeing better cars now.

[Mark D.]

Who's economy are we trying to stimulate? The U.S., Japan, Germany, South Korea? I think as Americans we would want to stimulate the U.S. economy . . . then why are we handing our money over to a foreign auto maker? Regardless of where the vehicle is made the profit goes to the company's country of origin. Might as well just write a check for about 400 million to the Japanese Government! If you think that is a great way to stimulate the U.S. economy, then I'll give you my address, mail me a check and sit back to see how your personal economy gets better! As Americans we should really start to think about helping ourselves out, just a little bit. Stop giving hundreds of millions of dollars to foregin companies to build plants in your states, then point at GM, Ford and Chrysler and say, you can't compete! Duh, I wonder why? If this bill is going to help us out then it must be heavily weighted toward discounts on American owned brands first! And in my opinion, only for American vehicles. But that won't happen, so why argue it. Let's make it simple, $2000 for U.S. vehicles, $0 for foreign on top of the flat rate of 30% (or more) increase in gas milage. It doesn;' matter what you currently drive, or what you get into! Let's keep our money in our country!

[Omar N]

This bill makes sense. Although not every vehicle owner will qualify for the credit, everyone will benefit. Cleaner air, less oil consumption, safer highways and sales growth for the auto industry. If this bill becomes l will surrender my '99 GMC Yukon for something more fuel efficient.

[Dave Hansen]

Yep, this is yet another really, really bad idea.

1) 1/2 of all of OUR money goes towards paying the salaries of government workers to administer the program. I.e., it produces absolutely nothing.

2) It is the opposite of capitalism, which is essential for productivity. I.e., instead of folks looking for new and better ways to be productive, they look for government-supplied benefits, to basically get something for nothing.

3) Buying a new car probably will have gasoline-saving benefits, but won't save Americans money. The money itself, of course, comes from us via taxes (and only 1/2 of it comes back). But even if the money 'grew on trees': you still have to pay a lot of money to buy it; your insurance will be higher; and you probably will have a higher state license fee to pay each year. And if you do the math on the gas savings, you'll see that it doesn't pay off for many years to come, even if you buy a hybrid. What's more, a lot of older cars are far from "clunkers". My '94 has 150k miles on it, and has very few mechanical (or aesthetic) problems. Vehicles built since the 90s have been excellent. So, bottom line, that's a lot of wasted money, even with the taxpayer funded discount.

4) And what's going to happen to the cars that are traded in? They aren't going to vaporize. They'll be sold to folks who can't afford a new vehicle. And so, they will continue to be on the road for many years to come.

5) Buying a car that's just a few years old is always a better deal, but that's not allowed. And why isn't it allowed? Simple: because the administration wants us to buy new cars, to help out the car companies.

6) And what do you want to bet that in coming years, the rebates will get larger, based on the fuel mileage differential? Understand what this means: The U.S. government takes control of major car companies, then requires them to build more fuel efficient cars, then offers rebates to consumers to buy them. The reason car companies haven't made these highly fuel efficient cars in the past, is because the market wasn't buying them (due to the added cost). This is not capitalism, folks, where the market forces of supply and demand drive the economy.

[John D. Furber]

This is not a good bill for cleaning the air nor saving petroleum. It is designed to sell new cars. You get no benefit from turning in a car older than 25 years, no matter how much it pollutes. Much better would be to model it after the old California program. You would turn in the old car to be scrapped, without having to buy a new car. Less wealthy people could then buy a more efficient used car, or choose to use a bike or public transit. If the guzzler is not scrapped, and the dealer turns around and resells it to another customer, then the environment does not benefit.

[Dave Hansen]

Or, what's more, what if someone (like myself) currently owns an old pickup truck, but is considering buying a VW TDI as a *second* car? I still need the pickup for hauling large objects and towing, but for day-to-day driving the VW is fine, and gets 3-4x the gas mileage. Nope, sorry, can't do it, or at least you don't get a piece of our tax money for it. It's only if I trash the pickup (which makes no economic sense -- I need the pickup) that I get back $4,500 of our tax money.

[Andrew H.]

I think the bill is marvelous. I have a really beat-up 95 Jeep Grand Cherokee that has a "new" MPG of 14 MPG. KBB value of ~$800. It's in in such bad shape I doubt I could get $500.I will trade it in for a new truck getting a "new" 21 MPG and get the $4500. So I'm up $4000 and the planet is rid of a clunker.

The dealer has already indicated I will get all of the rebates and incentives in place. Then the dealer will apply the $4500 and I'll get a loan for the negoitiated price minus the $4500. Sweet. Makes me glad I voted Democratic.

[Tom]

Gee - I did the right thing I thought last April when gas was $4.50 a gallon and traded in my 97 Durango (11MPG) on a very expensive Honda Hybrid - unfortunately I don't get a penny.

[Matt]

The law was obviously designed to help the car industry, but I would like to make one important point - the old cars MUST be scrapped (ie, the dealer must ensure that the car "(I) will be crushed or shredded within such period and in such manner as the Secretary prescribes; and (II) has not been, and will not be, sold, leased, exchanged, or otherwise disposed of for use as an automobile."

[john]

I want to trade in a 2000 Jeep Cherokee for a high mielage sedan. The bill is unclear if an SUV is considered a passenger automobile or a small truck. So am I trading in a 'small truck' or a "passenger car"? If it is a small truck and I buy a sedan (e.g. the 'new vehicle'), does the mileage need to improve by 10mpg or only 5 in order to get $4500 instead of $3500?

[Greg]

I have '99 Ford Taurus that will pass anything but a gas station. In other words, the 19 combined MPG that the EPA claims is about 2 MPG north "on average" of what I get and I have taken great care of the car. Now, try adding gas that is 10% ethanol and the MPG drops like a rock. My best average, 17.8 MPG with non-ethanol. With ethanol, barely 16!

The law is a joke but not because I do not qualify. It is a joke that most people driving cars that are worth less than the credit may not be the best people to jump into another monthly payment. I would think most cars worth less than a few grand are paid for. Now we are pushing people into more debt.

We have over spent in this country and used borrowed money. The economy would have recovered as it always does and one party used it as an excuse to spend us into oblivion.

I am glad I did not vote Democrat.