Cash for Clunkers bill: Is it green?

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 beapplied to a consumer’s purchase of a new vehicle. The vehicle to betraded in and scrapped must get less than 18 mpg combined, bemanufactured since 1984, be in drivable condition, and have beeninsured for the past year. Consumers must then purchase a vehicle thatgets 4 more miles per gallon than their old vehicle for a $3500incentive, or 10 more miles per gallon for $4500.

For light trucks, a 5mpg gain nets a $4500 incentive, while a 2 mpg gain is worth $3500.This incentive will be, for all intents and purposes, exclusive tovehicles with a resale value that is lower than the incentive value,meaning the greatest concentration of eligible vehicles will be largecars, pickup trucks, and SUVs that are more than 8 years old.

Bythe way, for work trucks older than 2000 they get a flat $1,000regardless of improvements. And since the vehicle to be traded has tobe continuously insured by the same owner for at least one year, carflipping or junkyard finds are not allowed.

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 beenblogging furiously last week. Some said this bill is just a way ofrewarding gas-guzzling car buyers with tax money for their poorpurchasing decisions and they will probably buy another gas-guzzlingvehicle anyway with the vouchers since the required lower mileage goalsare still achievable for those new Hummers, Jeeps, SUVs and pick-uptrucks 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 limitmileage goals. But then what would happen to those vehicles in the lotwaiting for new buyers with vouchers in their hands? And there are alsoother irate tax-paying citizens complaining that most of these voucherswill go to foreign car companies whose most vehicles match the mileagerequirements under this program.

That’s the problem of US car companies not leading the way ofproducing more fuel-efficient vehicles isn’t it? Another earliercomment 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 moreenvironment-friendly to donate them to charities instead.

Karen Campese of Cars4Charities complained that most of the carsthat are currently donated to charity will be eligible for a voucherunder the program.

“Since the tax deductionfor donating a car is only $500 or what the car sells for, charitieswon’t be able to compete. A better idea would have been to go back toallowing the donor to claim the book value for their car donation. Thisway all vehicles are eligible, the government doesn’t have to spend $4billion (should be $1bn here) on vouchers and trying to administer aprogram with rules that are not enforceable!

We will seehow this bill would do although same programs outside the US such as inGermany, UK, France, Italy and Spain seemed to be successful, accordingto Frost & Sullivan.

Frost & Sullivan noted that the difference in scale andrestrictions of the bill might pose a detriment to the success of theUS program compared to those in Europe.

[Photo from Flickr By crazytales562]

addthis_pub = ‘greenchicgeek’;

2 Responses to Cash for Clunkers bill: Is it green?

  1. jhenry2907 29 July, 2009 at 11:08 am #

    The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.


  2. jhenry 29 July, 2009 at 11:10 am #

    You don’t need a voucher, dealers will apply a credit at purchase


Leave a Reply