Finally, I was able to read more about the new Cash for Clunkers bill now to be officially called Car Allowance Rebate System (C.A.R.S) by July 22, which was passed by the US Congress last week and about to be signed by President Obama. This bill generated several debates as well although not as intense as the ACES bill.
Inserted as a tiny small bill called "Consumer Assistance to Recycle and Save Act of 2009" under the War Appropriations Act HR 2346, this $1 billion stimulus bill aims not only to help revive the auto industry but to also supposedly drive purchase of more fuel-efficient vehicles.Here is a summary of the bill taken from an explanation by a Frost & Sullivan consultant:
The "cash for clunkers" bill provides a cash incentive to dealerships to be applied to a consumer's purchase of a new vehicle. The vehicle to be traded in and scrapped must get less than 18 mpg combined, be manufactured since 1984, be in drivable condition, and have been insured for the past year. Consumers must then purchase a vehicle that gets 4 more miles per gallon than their old vehicle for a $3500 incentive, or 10 more miles per gallon for $4500.By the way, for work trucks older than 2000 they get a flat $1,000 regardless of improvements. And since the vehicle to be traded has to be continuously insured by the same owner for at least one year, car flipping or junkyard finds are not allowed.
For light trucks, a 5 mpg gain nets a $4500 incentive, while a 2 mpg gain is worth $3500. This incentive will be, for all intents and purposes, exclusive to vehicles with a resale value that is lower than the incentive value, meaning the greatest concentration of eligible vehicles will be large cars, pickup trucks, and SUVs that are more than 8 years old.
And once the $1 billion appropriated for the program runs out (good for an estimated 250,000 vouchers), it's over unless Congress extends the program. For more information, a new organization "Cash for Clunkers" was set up to educate the public about the bill. And yes, they're on tweeter too!
As mentioned, this bill should help the environment by trading in their gas-guzzling cars with more fuel-efficient vehicles right?
Wrong, according to several irate tax-paying citizens who've been blogging furiously last week. Some said this bill is just a way of rewarding gas-guzzling car buyers with tax money for their poor purchasing decisions and they will probably buy another gas-guzzling vehicle anyway with the vouchers since the required lower mileage goals are still achievable for those new Hummers, Jeeps, SUVs and pick-up trucks available in the lot.
One way to really see a boost to buy more fuel-efficient vehicles, according to Frost & Sullivan, is to increase the lower limit mileage goals. But then what would happen to those vehicles in the lot waiting for new buyers with vouchers in their hands? And there are also other irate tax-paying citizens complaining that most of these vouchers will go to foreign car companies whose most vehicles match the mileage requirements under this program.
That's the problem of US car companies not leading the way of producing more fuel-efficient vehicles isn't it? Another earlier comment from the green blog (and I haven't even posted this one yet!) is that with those clunker cars going to be scrapped, it is more environment-friendly to donate them to charities instead.
Karen Campese of Cars4Charities complained that most of the cars
that are currently donated to charity will be eligible for a voucher
under the program.
"Since the tax deduction for donating a car is only $500 or what the car sells for, charities won't be able to compete. A better idea would have been to go back to allowing the donor to claim the book value for their car donation. This way all vehicles are eligible, the government doesn't have to spend $4 billion (should be $1bn here) on vouchers and trying to administer a program with rules that are not enforceable!We will see how this bill would do although same programs outside the US such as in Germany, UK, France, Italy and Spain seemed to be successful, according to Frost & Sullivan.
Frost & Sullivan noted that the difference in scale and restrictions of the bill might pose a detriment to the success of the US program compared to those in Europe.
[Photo from Flickr By crazytales562]