Cash For Clunkers Bill Proposed in US House

By Chris Haak

03.19.2009

clunkerUS Representative Betty Sutton (D-Ohio) has written a bill that gives consumers between $3,000 and $5,000 for buying a new vehicle that is more fuel efficient than their old one.  Ms. Sutton’s bill also provides a $3,000 mass transit voucher to anyone who turns in an old car.  Under the bill, cars that are scrapped have to be at least eight years old, and the new cars purchased have to be 2009 or newer model years.  To be eligible for an incentive, the new car has to achieve at least 27 miles per gallon on the highway, and incentives are higher based on where the vehicle is assembled (more money for US-built cars) and how fuel efficient it is (more money for more fuel efficiency).  The new vehicle must also cost less than $35,000.

Although the bill’s passage is far from assured, both the UAW and the Detroit Three are in favor of it.  Many in the auto industry have been asking for some Congressional action that would help stimulate new-car demand for the past few months, and this proposal might do that trick.  Amidst an environment that saw overall Western European sales fall by 17.7% in February 2009, Germany’s actually climbed by 21.6% during the same period.  Germany’s sales bucked the trend because in February it instituted a voucher worth $3,260 for scrapping vehicles more than nine years old, and at least some folks are seeing inspiration from Germany’s (at least temporary) success with such a program.

Longer-term success of the program is not guaranteed.  For one thing, most people driving around in cars worth less than $3,000 are probably not in the market for a new car, even one at a price subsidized by the Federal government.  For another, the supply of scrappable cars will eventually dwindle.  If you have a $100 piece of junk today, you could theoretically sell that to someone for $2,999 the day this bill became law.  Finally, just as the sales impact of employee pricing discounts softened over time, and research showed that buyers who were already intending to buy a car later in the year just pushed up their purchase timeline to take advantage of the deals, leaving few buyers in subsequent months, an artificial demand stimulus like Rep. Sutton’s proposed bill might have a similar effect.

Rep. Sutton’s bill also contains a $7,500 cash voucher starting in the 2011 model year for purchase of a plug-in electric hybrid that gets at least 100 miles per gallon.  That provision is obviously targeted at the Chevrolet Volt, which is expected to be a 2011 model year vehicle (GM said today that it expects the Volt’s on-sale date to be November 2010).

The Alliance of Automobile Manufacturers, an industry consortium made up of 11 companies ( BMW Group, Chrysler LLC, Ford Motor Company, General Motors, Jaguar Land Rover, Mazda, Mercedes-Benz USA, Mitsubishi Motors, Porsche, Toyota and Volkswagen) is opposed to the proposal, as it treats member companies differently.  Generally, car collectors are opposed to these types of programs as well, because it increases the price and decreases the availability of parts cars.  Once an old car is removed from the rolls and crushed, it’s no longer offering parts to keep a true classic – or even a “neo-classic” – on the road.

I’m in favor of it, even in spite of the likelihood of its success limited to a relatively-short time frame.  We need to get the economy moving again, and selling a few hundred thousand additional vehicles for a few months seems like a decent start.  That being said, the auto market may never recover, and we certainly won’t see any kind of measurable recovery until the economy at large – and therefore consumer confidence – begins to recover.  It’s also not a bad idea to get smelly old cars off the roads – of course, older cars cause far more pollution than do new cars.

COPYRIGHT Autosavant – All Rights Reserved

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

Share This Post On

5 Comments

  1. The big problem will be for people who can’t afford a new car…..basically any car over nine years old will now have a baseline value of $5,000….even if it is a worn out rust bucket.

    Plus it is just another subsidy to insulate consumers from the real price of motoring…

    I can see quite a few people swapping their clunker cash to their dealer at their new car purchase….and the dealer boosting their changeover prices to make the most of the margins and the free government money.

    Perhaps this deal won’t apply to lease vehicles?

    Why not avoid the subsidy and do what the Japanese have done for years and simply make older and relatively inefficient cars more expensive to register & insure each year….which has led to an export boom to countries like Australia & New Zealand for all sorts of previously unavailable JDM goodies.

    But then that wouldn’t be as politically popular as so-called free money would it?

  2. This bill is trying to do too many different things, none of them very effectively.

    If the goal is to get people into more fuel efficient cars, there will never be a greater incentive than raising the gas tax (yes, that hurts the poor, but like you said, new car incentives are no better as they benefit everyone BUT the poor).

    If the idea is to get older, higher emission cars off the road, let’s go ahead with a “cash for clunkers” program. But don’t tie it in with new car incentives, which simply encourages the “drive everywhere” mentality, when people might otherwise decide to give alternative (i.e. greener) transportation methods a try, not to mention the environmental pollution generated from the manufacture of a new car.

    In the end, this is just another government giveaway of money it doesn’t have to support an industry trying to support more jobs than should actually exist.

  3. A 9 year old car isn’t a “poluting clnker” by any means. I have a hard time believing that a 2000 Honda Acord polutes that much more than a 2009 model. Odds are the 2000 actually gets better milage becasue it’s lighter.

    If you are talking about a car from the 70’s or 80’s one can make that argument. But since the late 90’s (i.e. anything with an ODBII computer in it) emmisions havn’t really changed much.

  4. Mark, a 2000 Accord four cylinder is rated at 20 city/28 highway (23 combined) while a 2009 Accord four cylinder is rated at 21 city/30 highway (24 combined). (Both with automatics).

    All 2009 Accord models are at least ULEV-rated, with CARB-compliant cars being PZEVs (automatics) or SULEV (manuals). It’s hard to find the info one 2000 Accord’s smog-forming emissions stats, but they were better than the pack back then – yet still not as good as a 2009 model’s.

    Aside from the above, the more important thing to keep in mind about a nine year old car is the ratings above pertain to the car when new. It’s probably a reasonable assumption that the rings and seals aren’t as good as they once were, and more oil is making its way into the combustion process.

    But to your point, Mark, a 9 year old car isn’t a polluting clunker – yet think about the last time you found yourself behind a smelly car – chances are it wasn’t a recent model.

  5. You make my point for me. 10 year old cars are not a problem. 10-15% better smog performance (at best) is in the noise statiscicly speaking.

    In AZ (Metro areas) you can’t register you car unless it passes a smog check, for an ODBII complient viehicle (pretty much everything 1997 and later), that means that if the check engine light is off (and working), you pass.

    Now if you want to talk about a 75 Chevy Nova, then yeah, that’s a polution machine with wheels on it. (it’s also 30 year old technology, not 10)

    The bill is just badly written compared to what it is trying to accomplish. Under the bill I could scrap my old 96 Contour (which got real world 34mpg on the highway I-4, manual) for a Fusion, which gets worse highway milage (29mpg in I4 with manual) and get the payment, but if you swap a mid eighties F-150 (which got around 14-15 mpg) for a new one (which gets 18-20)you wouldn’t.

    You save a lot more fuel with a marginal 2-4 mpg improvement on a viehicle with low milage, than you do with a higher mpg car.

    A better way to write it would be to require the newer car/truck/whatever to have an EPA mpg 25% greater than the old one.

Submit a Comment

Your email address will not be published.