Cash for Clunkers Will Soon Take Effect

by Lynn B. Johnson on June 22, 2009

gas-guzzlerThe Senate’s “Cash for Clunkers” bill passed Thursday, as an addenda to the war-spending bill. It was approved by the House last week. The bill allows for trade-in vouchers of up to $4,500 for owners of gas guzzlers who want to buy or lease a new, more fuel-efficient vehicle.   If signed into law by President Obama, the program is likely to go into effect in August.

Called “Handouts for Hummers” by critics, the program is less green than advocates had hoped, and will not do an extraordinary amount to limit the United States’ dependence on foreign oil. Car owners could get a $3,500 voucher for trading in an under-18 m.p.g car for one that gets at least 22 m.p.g., or $4,500 if the new car gets 10 m.p.g. higher than their existing vehicle. Truck, minivan, and SUV owners will receive a $3,500 voucher for buying a similar new vehicle that gets at least 2 m.p.g. higher; that voucher will increase to $4,500 if the new truck/van/SUV gets at least 5 m.p.g. higher than their existing vehicle.

There are some concerns that the program is underfunded: the bill provides $1 billion for July through November of 2009. Keith Johnson of the Wall Street Journal posits that the program could cost about $4 billion.

Not only that, but even GM’s CEO, Fritz Henderson, said the legislation would help increase new-car sales by only 10 percent, compared with Germany’s 40-percent rise in new-car buying after a similar program was introduced in that country.

Finally, if your car has a trade-in value that is higher than the $3,500-$4,500 voucher amount, you’ll probably be better off forfeiting the voucher, although some cash-starved car dealers might think of ways to maximize your trade-in.

Discussion

Lynn B. Johnson
No clunker, I believe that if your new dream car gets 10 mpg higher than your car, that you will indeed qualify for the program.

Evelyn, $4,500 goes a long way, especially if your current car would usually only trade-in for $1,000. And, as the program isn't until the end of time, there will still be junkers to buy (wish I could point you to my next-door-neighbor's front yard).
June 25 at 11:06 am
Evelyn H.
if you're a "broke" college student, i fail to see how a $4,500 voucher will help when you go to pay significantly more for a new car. From a $ view, a new, more efficient vehicle will take many years of driving before it financially benefits you. Then there's insurance to worry about.

A really broke kid would be complaining about how this legislation trashes older, working cars, reducing spare parts for those who don't have the cash to front for something newer and more efficient right now
June 23 at 18:43 pm
no clunker
I drive a 1995 oldsmobile, and its city is 18 mpg, but the combined score that must be used is 20. So I this bill does not help me at all.

The new car I want is 30 mpg, which is still 10 mpg more than my current, and I am hoping the bill will be more sympathetic to people like me. I'm a broke college student that is about to graduate in December, and savings on a new fuel efficient car would have been great with this voucher.
June 23 at 16:53 pm
Lynn B. Johnson
According to a US Dept. of Energy Web site, "MPG requirements for 1985 model year vehicles and newer are based on the Combined 'New EPA MPG' as given in the Find a Car section of our Web site." More info available at http://www.fueleconomy.gov/feg/cash4clunkers.shtml

Norval, according to the chart at the same Web page, you are correct.
June 23 at 09:26 am
Russel
Who determines what gas milage your car gets now?
As a car or truck gets older the milage gets worse.
June 22 at 10:52 am
Norval
I assume this means $4,500.00 regardless of the mileage your current car gets ,along as the new one gets 10 more. The 18 mpg does not apply in that case.
June 22 at 10:07 am

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