Saturday, June 13, 2009

Cash For Clunkers Bill

Washington is hard at work on spending our money! Currently they are working on a "cash for clunkers" bill that would in effect allow people to trade in junkers and get a federal tax credit for buying a new car. The bill is supported by the auto industry. The bill was tacked on to a bill to fund the Iraq and Afghanistan wars.

The "cash for clunkers" bill would give tax payers a tax credit for up to $4500 for automobile purchases between July 1st and November 1, 2009. The funding amount is one billion dollars so the program could end sooner if it spurred sales.

The bills objective to trade-in gas guzzlers for more fuel efficient vehicles. A purchaser of a new passenger car would receive a voucher for $3500 if their new vehicle new vehicle gets 4 MPG combined mileage more than the trade-in vehicle. They would get $4500 if the new vehicle gets 10 MPG more than the old vehicle.

The bill is controversial since environmentalists are of the opinion that the bill could give the credit to someone who gets a additional 1 MPG for the purchase of a light truck like the Hummer H3t, which gets approximately 16 MPG. Certain Senators like Diane Feinstein (Democrat CA) are upset that the subsidies could be used to purchase gas guzzlers. She and other Senators proposed an amendment that would increase the gas mileage requirements and allow the purchase of used cars.


My take is that some type of program like this has been used in other countries to spur auto sales. Italy, Spain, Germany, England and Brazil all have somewhat similar programs. Some of the programs have met with success....other less so.

Congress should review the other countries programs and find the most successful model and implement. It would be good to get car sales going up again. The current bill is riddled with inconsistencies and limited funding. If congress wanted to stimulate auto sales they should implement a serious program. The current bill will probably have limited it unfortunate that congress cannot do things the right way....rather than half way.

If your in the market for the next few months.....I would recommend taking advantage of the voucher. It would be an additional discount beyond what the manufacturers are offering.


  1. 60% the cars that are currently donated to charity will now be eligible for a $3500 or $4500 voucher under the cash for clunkers program. Since the tax deduction for donating a car is only $500 or what the car sells charities won't be able to compete with the program and charitable car donation will end. A better idea is to just change the amount a person can deduct for donating their car back to the book value. That way every car is eligible, the government doesn't have to spend $4 million of our dollars giving away vouchers and trying to administer a program that is way too convoluted!

  2. Hi Karenc,

    Thanks for bringing up the charitable contribution for automobiles! Your correct...this bill could have a major impact on the charities that rely on auto contributions...but currently that would be short lived due to the limited period and funding. A new spending bill would have to renew the program.

    I agree with you that this program could get very convoluted! Your suggestion would definitely help the charitable organizations...this addendum appears to be designed to direclty increase new auto sales.

    Your suggestion to simplify the administration is a great idea. We need more thinking like that in Washington!

    Thanks for your thought provoking comment!

    Pete Baca
    The Car Enthusiast Online

  3. Thank you Peter, this is a great post. Like you said this will not help much. They are hiding things like this in the war funding bill. This is getting past a joke. Congress is not helping things at all. This is trying to get control of things that they should not be into at all. The power grab that they are trying to do. It is not right. They are grabbing the states right and our rights. It is very upsetting.
    Dan and Deanna "Marketing Unscrambled"

  4. Hi Pete ..we have a scrappage programme too .. I expect ours is just as terrible .. and administrative waste of time and energy ..

    Go well - Hilary Melton-Butcher
    Positive Letters

  5. Hi Dan & Deanna,

    Unfortunately politics are such a major problem with congress...there are different factions and they all have different ideas.

    This is a difficult time and congress should do the right thing! Unfortunately, they don't seem to know what is the right thing to do!

    Then they wonder why the American public gives them such a low rating!

    Thanks for your comment!

    Pete Baca
    The Car Enthusiast Online

  6. Hi Hilary,

    My research has shown the the program in England has been quite contentious! The political situation there is also very tenuous.

    Let's hope for the best! Thank you for your comment!

    Pete Baca
    The Car Enthusiast Online

  7. Hi Pete,
    This won't work! It has no merit behind it. Look what happened when Germany tried a similiar program. They increased car sales, but it was for other countries. Let's go back to the drawing board, and get a better plan.

  8. Hello Dr. Bob,

    Your correct...I am of the opinion thtat the current verion of the bill will not work as intended.

    The German plan backfired on the German politicians...they thought it would spur purchasing of new German cars but it actually increased import sales.

    I will do a new post on the results of the German cash for clunkers program!

    Thank you for your comment!

    Pete Baca
    The Car Enthusiast Online