Late yesterday the U.S. Senate went along with a slimmed down version of the Cash for Clunkers bill already approved by the House of Representatives last week. The bill offers incentives of $3,500 to $4,500 to car buyers who trade in their vehicles for more fuel-efficient vehicles by this October.
The bill just squeaked through after strong lobbying by the Democratic leadership overcame unified Republican opposition.
Four Republicans — Kit Bond, Missouri, Thad Cochran, Mississippi, Susan Collins, Maine and George Voinovich, Ohio voted with 54 Democrats in favor of the clunker measure. The other two votes needed to block procedural move by the Republicans to kill it came form two independents. Ben Nelson, Democrat, Nebraska, voted against the bill, with 35 Republicans.
|
Country |
Program |
Sales % over ’08 |
GermanyVehicle Scrappage Incentive
|
|
March (+40%)April (+19%)
May (+40%) |
ChinaVehicle Scrappage & Tax Reduction Incentive
|
|
February (+29%)March (+8%)
April (+25%) |
FranceVehicle Scrappage Incentive
|
|
March-May (+4%)
|
SlovakiaCar Scrappage Incentive
|
|
March (+18%)April (+43%)
|
| Source: Automotive Trade Policy Council | ||
One billion dollars in taxpayer funds were provided. Scrappage vehicles eligible cannot get more than 18 mpg combined EPA rating.
Since Clunkers was first proposed back in January, the complicated and controversial bill has been caught between environmental and commercial factions without agreement as to what it is supposed to accomplish.
Scrappage programs in Western Europe have led to 500,000 additional passenger vehicles sold in the region from January through May 2009, according to a recent analysis by R. L. Polk & Company. And similar programs starting in January in China have led it to surpassing the U.S. in auto sales so far this year, a trend that is likely to continue.
Lonnie Miller, director of industry analysis at Polk estimates that nearly one million additional vehicles could be sold in the U.S. in 2009.
President Obama is virtually certain to sign the bill when it arrives at his desk next week.
|
No Scrappage Program |
||
| United StatesNo Scrappage Program
State & Local Tax deduction
|
|
March (-37%)April (-34%)
May (-34%) |
| U.K.
No Scrappage Program in place until May 1st
Auto Tax Reduction Incentive |
|
February (-22%)March (-30%)
April (-24%) |
| RussiaNo Scrappage Program
Auto Tariff Increase |
|
February (-38%)March (-47%)
April (-53%) |
| MexicoNo Scrappage Program
|
|
February (-29%)March (-20%)
April (-38%) |
| Source: Automotive Trade Policy Council | ||
The idea of this bill makes sense, but I have always wondered about the pure mechanics of it. It really only makes sense if the gas guzzler ends up being scrapped. Simply giving it a new owner may help sell new cars, but it does not help improve the fuel economy of the fleet of vehicles in operation. What mechanism is there to see that the car traded in is not resold and reregistered for the street?
I have a 1996 Mustang Cobra which gets about 16 MGP and is probably worth under $8000. If I could get an additional $4000 towards buying a new car that becomes a pretty interesting proposition. But, I can not imagine a dealer taking in the Mustang and junking it…as it is a red convertible in nice shape with low mileage. Who is going to keep this system honest?
I suspect it will have a very positive effect on the property values in many areas where people tend to retire their older cars at the edge of their drive way. These cars, which were getting infinite miles per gallon, because they had not moved in years, may end up being replaced by more current, higher mileage vehicles….which might actually end up burning fuel rather than growing moss.
Vehicles more than 25 years old are not eligible. The scrapped vehicle has to be registered. And there were provisions in the House Bill, which the Senate basically picked up, saying the car must be scrapped. As always the devil will be in the details when the bill is finally published in the Federal Register.
And, yes, I remember Senator Dodd from AIG’s headquarter’s state, Connecticut, who inserted language in the bailout bill that allowed taxpayer funds to go AIG executive bonuses.
I have serious doubts about this program.
What’s to prevent dealers from imposing a “scap” fee to recoup some of the voucher value?
What’s to prevent auto manufacturers to reduce their incentives with the voucher program?
What do we say to the people who bought cars earlier this year? You’re a chump and the gov’t is going to subsidize your neighbor.
Does this incentive include used car purchases? And, if so, used cars purchased at independent (not new car)dealers? When will be be able to take advantage of this?