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'Cash For Clunkers' Bill Rolls On

Congress hopes to jump-start consumer demand for new cars

By Mark Huffman
ConsumerAffairs.com

June 13, 2009

Voting could take place next week but passage is almost assured and President Obama, a strong supporter, is almost certain to sign the bill, which lawmakers hope will stop a steep slide in new-car sales. Now that taxpayers have paid billions to prop up Chrysler and GM, there's growing concern that suddenly thrifty consumers simply will choose to keep their old cars on the road instead of ponying up for new ones.

The measure would subsidize the purchase of up to one million vehicles. The current price tag on the bill is $1 billion. The program would end when the money ran out.

The bill would require that trade-ins get no better than 18 miles per gallon, be a 1984 or newer model, and have been registered and insured during the past year. The last provision is intended to keep quick-buck artists from flooding the program with junkers scavenged from used car lots.

If consumers purchased a new vehicle that gets an extra four miles per gallon or more, they would receive a voucher for $3,500. If they purchased a new vehicle that gets 10 miles per gallon or more than their trade-in, the value of the voucher goes up to $4500.

Critics object

Is it worth it? Not everyone thinks so.

Republicans say the program would cost too much and accomplish too little.

Perhaps surprisingly, some environmentalists are also critical. These critics, inclduing Sen. Dianne Feinstein (D-Calif.), say the measure is not strict enough in its mileage requirements and could, under some circumstances, subsidize the purchase of gas-guzzling SUVs.

"It is amazing how quickly a good idea can go bad in Washington," said Feinstein and Sen. Susan Collins (R-Maine) in an opinion article in the Wall Street Journal, headlined: "Handouts for Hummers."

Auto industry analysts say the plan, if implemented, could stimulate new vehicle sales beginning as early as August. Since many of the "clunkers" are in the truck category, they say the plan would likely have the most impact on U.S. truck sales.

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