Cash for clunkers awaits the President's green light
Posted
Jun 19 2009, 10:48 AM
by
Catherine Holahan
Rating:
After idling in Congress for more than a month, the cash for clunkers bill is heading to President Obama's desk.
The bill would give vehicle owners vouchers towards the purchase of a new ride in exchange for their older, less fuel-efficient model. To qualify for the program, the old vehicle would have to get 18 miles per gallon or less and, presumably, be worth less than the maximum government grant of $4,500. Otherwise, the customer would get more money simply for selling their used car or truck.
Vouchers vary depending upon the increased fuel-efficiency of the new car. The government gives $3,500 towards the purchase of a car that gets 22mpg, or for new trucks or SUVs that are 2mpg more efficient than the trade-in vehicle. Grants rise to $4,500 for cars that get 10mpg more than the old vehicle, or for trucks and SUVs that get 5mpg more than the trade-in.
The government hopes that the program, which will cost about $1 billion, will jump start auto sales as well as remove some of the least environmentally-friendly vehicles from the road. The government will junk traded-in cars, rather than recycle their parts.
But there are critics who say the bill will accomplish neither of these goals.
Some auto industry advocates say the bill won't come close to selling the 1 million vehicles hoped. They argue that the folks still driving cars old enough to be worth less than $4,500 don't have the money to buy a new car. Jeremy Anwyl, chief executive of Edmunds.com, told the Associated Press that the car would struggle to provide 250,000 in new vehicle sales.
In fact, some opponents of the bill say it will actually make it more difficult for less-affluent consumers to drive. Aaron Lowe, vice president of government affairs for the Automotive Aftermarket Industry Association, argues that scrapping older cars makes parts more expensive for folks that can only afford to repair their gas guzzlers.
"We don't see anyone that it is really going to benefit except the people that could buy the car on their own," said Lowe.
Environmentalists, meanwhile, maintain the bill does not go far enough to remove polluting vehicles from the road. Ann Mesnikoff, director of Green Transportation for the Sierra Club, supported junking the cars saying "those are the things you don't want on the resale market." But she wanted the government to give grants towards the purchase of the most fuel-efficient cars, not simply those with scant 2mpg improvements.
"We have subsidized the sale of something that may be guzzling gas for the next 20 years," she said in an interview last month.
Despite the bills' failings, some auto industry advocates say that doing something was better than nothing. Auto sales are at multi-decade lows - down about 37% from the beginning of the year. Deals offered by closing dealerships helped sales stabilize slightly in May. But, auto industry advocates says consumers need more financial incentives to return to show rooms and help stabilize the industry.
"Certainly something needs to be done to help stimulate vehicle sales," said Charles Territo, a spokesperson for the Alliance of Automobile Manufacturers. "This has the potential to take hundreds of dollars a month off the monthly payment of a new vehicle."
Related Reading:
Could your clunker bring you $4,500?
Cash in on your gas guzzler
Cash in on the 'clunker' bill
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