Half-Hearted Cash for Clunkers Bill Awaits President's Pen
June 19, 2009

By Bill Visnic

Finally agreeing on legislation hoped to spur the nation's beaten-down auto sales and get some gas-guzzlers off the road, the Senate last night passed a version of the long-debated Cash for Clunkers bill that only needs President Obama's signature -- which he said will happen -- to become law.

Too long in coming and too limited in reach, the final bill, part of larger war-spending legislation, earmarks a $1 billion fund for owners of older, less-efficient models to trade in for new vehicles that use less fuel and emit less pollution. The program's official name is Consumer Assistance to Recycle and Save (CARS).

Owners of 1984 or newer vehicles with a combined fuel-economy rating of 18 mpg or less will get a voucher for $3,500 if the car they trade for gets at least 4 miles per gallon better than their clunker. The payday improves to $4,500 if the purchased vehicle delivers a combined rating of 10 mpg better than the traded vehicle.

Jeremy Anwyl, CEO of Edmunds.com, parent of AutoObserver, reckons the measure, expected to take about 30 days to implement and set to expire in November, might generate only about 250,000 new sales for struggling automakers and dealers -- a fraction of what originally was hoped and with a stimulus impact much less than seen in other nations that have adopted similar programs.

"In the end, this is a non-event," Anwyl said. "Even 250,000 new-vehicle sales will not provide the impact needed for an industry looking for at least 5 million in additional sales."

Critics of the much-debated legislation abound, their disdain for the bill centered on the fact it does not sufficiently encourage purchase of high-economy models, nor do its stipulations particularly invite large-scale participation in the program.

Anwyl says most vehicles that qualify will be older models -- the 18-mpg combined fuel-economy threshold is lower than the majority of newer vehicles achieve -- and as such, are likely to be owned by those either without the income or without the desire to purchase a new vehicle.

Those hoping for greater environmental gains from the measure are disappointed, meanwhile, by the requirement the clunkers' owners own the vehicle for at least one year.

This condition eliminates the potential for the purchase of a clunker with a value less than the bill's $3,500 or $4,500 limits solely for the purpose of trading in for a new vehicle. Opponents argue if the goal is to stimulate new-vehicle sales and/or get high-consumption, high-emissions vehicles off the road, the ownership stipulation is counterproductive.

Finally, after the president signs the bill, it must go to the National Highway Traffic Safety Administration for preparing the details to implement the Cash for Clunkers program. That may take 30 days or more, meaning the program will not come into effect until late July at the earliest, missing much of the summer, typically a strong selling season in auto showrooms.

"This legislation has been one of our top priorities. It will help restore consumer confidence in the economy by stimulating vehicle sales; while at the same time benefiting the environment by replacing older vehicles with cleaner and more fuel-efficient autos," said Dave McCurdy, chairman of the Alliance of Automobile Manufacturers.

"Cash for Clunkers will benefit everyone from the consumer looking for the extra incentive to purchase a new car, to the communities who will receive additional tax revenue from the sales of new vehicles."

Edmunds.com has put together a comprehensive list of vehicles that meet the Cash for Clunkers eligibility conditions, particularly the 18-mpg (or less) combined fuel economy and a market value of less than $4,500 for a typical-condition example.

Posted by Bill Visnic at 8:23 AM under Business , Featured , In the Media , News | Comments (6) | digg this | Seed Newsvine

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