Cash for Clunkers Plan Could Be Worth $25 Billion

Scrapped_Cars Consulting firm CSM Worldwide released a report saying a thoughtfully designed cash-for-clunkers law could pump as much as $25 billion into the U.S. economy and ratchet up sales by as many as a million cars.

Versions of the proposed legislation, which President Barack Obama mentioned during a speech today about the auto industry, come both from auto-state lawmakers looking to promote domestic sales and from lawmakers hoping to address environmental concerns by getting owners of gas-guzzlers into more fuel-efficient cars.

A compromise bill could work quite nicely because people on both sides of this argument are right and wrong: Some proposals would mandate that people replace their clunkers with new domestic cars in order to receive the cash, while other proposals limit the pool of eligible cars to only the most fuel-efficient models — essentially, hybrids and compact cars.

Any law discriminating against foreign automakers would certainly meet with complaints of trade-law violations, and as CSM points out, allowing buyers to trade in a gas-guzzling SUV for a more fuel-efficient SUV would cut more carbon emissions overall than would a law applicable only to buyers willing to go from a Hummer to a Prius.

Any scrappage plan will help in this depressed auto market, but if Congress gets this legislation right, Detroit, foreign automakers, the economy and the environment could all win.

Lawmakers Inch Toward ‘Cash for Clunkers’ Deal (Detroit News)

Comments 

Juan Carlos

I hope the cash is right away no matter what. nothing about waiting for next april 15 or "up to" and "may."If the car is 20k and right away teh car is 13k, then we are talking.

Six

The original intent of this bill was supposed to be to better the environment by improving fuel economy. But the environment will not be bettered by sending old cars to the scrap heap and manufacturing new cars.

It takes a lot of mining, energy use, etc., to make a new car, and driving an old car, even if it is less efficient, saves that energy and keeps that old car out of the landfill.

This bill has nothing to do with the environment, it's just another stimulus, this time to encourage new car sales. I suspect that more than anything it will affect people that are planning on buying a new car anyway and happen to have an old car laying around.

For the folks like my father who drive a car until the wheels fall off and usually buy a used car, no small cash incentive is going to make him give up his still working car.

maxwell

Any program that favors high mileage cars, would favor foreign makers over domestic ones. That segment is dominated by non American companies. Due to umpteen zillion trade agreements to which the US is party, sales cannot be limited to domestic brands, or even US made cars. Thus, high mileage requirement would boost foreign employment while hurting US employment.

To make matters worse, the domestic brands make little, if any, profit on compacts due to UAW costs. The high mileage requirement would boost demand for compacts and subcompacts, resulting in higher prices for consumers (fewer maker or dealer incentives). This would increase profits for foreign makers at the expense of the domestics.

Given the amount of money spent on GM and Chrysler, with promises of more to come, the high mileage requirement would conflict with the stated purposes of "saving" those companies and the UAW.

Original sheth

First of all the "domestic" proposal included ALL vehicles made in NORTH AMERICA. I think we all know Toyota, Honda and others makes cars on this continent. It would have not covered IMPORTS like the Prius and that seems reasonable to me. This is supposed to be about keeping Americans working, not people in Japan. Thats just the truth. To offer a taxpayer subsidy for hybrids made in Japan is crazy. The real story is that environmentalists want this bill to be aimed at boosting hybrid and subcompact car sales and thus they want imports in those categories to be favored.

Pete Dougherty

This is just another example of the government trying to take control of every aspect of your life. I drive a car that is 22 years old with 230,000 miles and it gets 30+ miles to the gallon. Oh, and I have less than $1,000 invested in it. Why would I want to go out and spend tens of thousands of dollars on a new car that probably doesn't get much, if any better gas milage, plus the extra expense of having to carry a bunch of extra insurance?

JAMG

Extremely important question: under the compromise bill, what will be the criterion for getting a voucher? The age of the vehicle (the house bill gives vouchers for vehicles older than 8 years)? Or the "original" MPG of the vehicle when produced (as in the senate bill)? If MPG is used, will we use the "original" figures or the “recalculated” (post-2008) figures (which are closer to reality). My 17 year old Geo Prizm, which got a decent MPG when manufactured (but not so much now), may or may not qualify--but I'll certainly continue to put off the purchase of a much needed car until I know for sure. In the meantime, I'll just pay to weld the muffler back on (again).

Clara

My registration expired in September of 2008 and I paid the late fees in November. I have owned the car for over 4 years and have been driving it. Do I still qualify for the program?

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