By Truman Lewis
ConsumerAffairs.com
June 24, 2009
No one can say carmakers have gotten short shrift from Congress and the Obama Administration. In the latest attempt to breathe life into the moribund U.S. auto industry, President Obama today signed the "cash-for-clunkers" bill, which sped through Congress like a Corvette through a speed trap.
The measure offers cash vouchers worth as much as $4,500 to consumers who trade in their old cars for new, more fuel-efficient models. Its passage was assured when Democratic backers in the House attached it to a bill that provides funding for troops in Iraq and Afghanistan. The Senate went along, on a 91-5 vote.
The President's signature starts the clock on a 30-day period during which the federal government will write regulations that will govern just how the program will work. But the hype has already begun. Dealers are champing at the bit to start running even louder TV ads — and scam artists are already hard at work.
The National Highway Traffic Safety Administration (NHTSA) warned earlier this week that consumers should not be deceived by official-seeming sites such as "Cash For Clunkers Headquarters," which claim to offer information on how to trade in your car. Sites that ask for personal information or offer a pre-registration opportunity should not be trusted, the agency said.
The official site, Car Allowance Rebate System (CARS) has the latest information on the program — but consumers should remember that, although Congress and the President have signed off on the plan, it will not be in effect until the final regulations are written.
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.
Besides the clunkers vouchers, the feds have invested billions of dollars of taxpayers money to buy time for bankrupt Chrysler and General Motors. Also, the economic stimulus bill provides a sales and excise tax deduction for new-car purchases.
Sales tonic
Like every piece of legislation, the clunkers bill is promoted as achieving several goals. Besides boosting auto sales, it's supposed to reduce dependence on foreign oil and improve air quality, although critics say it's unlikely to achieve any of those goals. The Congressional Budget Office estimates that the bill will result in the sale of 150,000 new cars through Nov. 1.
"This program will provide a much-needed boost to the struggling auto industry, including manufacturers, dealers, suppliers and other related industries," Sen. Carl Levin, D-Mich.
Car dealers — at least those who are still in business — are applauding the measure. A spokesman for the National Automobile Dealers Association said the vouchers would amount to "money on the hood toward a down payment reducing a customer's monthly costs,"
Supporters include not just domestic automakers. The Association of International Automobile Manufacturers (AIAM) was also a cheerleader for the measure.
"We expect the 'cash for clunkers' program to help stimulate the economy and drive an increase in industry sales. Such a program will also radiate economic benefits out to suppliers, dealers and small businesses all around the country," said AIAM CEO Michael J. Stanton.
"Fleet modernization programs have been previously adopted by many countries in Europe and Asia, producing very positive results. With the auto industry playing such a key role in the overall health of the American economy, AIAM believes the successful implementation of this program can play a significant role in fueling the recovery of the nation's economic health," he said.
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.
