CARS or Cash For Clunkers Means Some Win, Some Lose

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Ford Motor Co. said it would ramp up automobile production by 150,000 U.S. cars this year.  Sales have surged due to the U.S. “Cash for Clunkers” program. This is the popular name for the Cars Allowance Rebate System (CARS) program.

The rebate allows car buyers to receive up to $4,500 from the government toward the purchase of a qualifying new vehicle when trading in an older model that gets 18 miles per gallon or less.


Who’s Cashing in on All Those Clunkers?  According to the Compete blog, the cash for clunkers program boosted online attention from new vehicle prospects, both in terms of unique visitors to the site and to OEM sites. That attention, combined with attractive incentives to junk an old gas guzzler and replace it with a newer, more fuel efficient model contributed to a July sales surge of more than 15% month-over-month.

Not everyone was happy.  According to watchdog groups, some ‘clunkers’ dealers were requiring payback agreements. The government website is very clear that Consumers Are Not Required To Sign Contingency Agreements To Pay Back The Dealer Should The Cars Credit Be Rejected.  Some dealers were also asking consumers to keep their “clunker” until the deal was approved by NHTSA.

Another unfortunate consequence of all this is that ‘Cash for clunkers’ is hurting charities.  Some charities rely on car donations to raise funds.  Instead people who would normally donate their car are now turning them in to dealerships.  While those who donate vehicles to charity receive a tax deduction for the price the car sells for at auction — typically $500 to $900 — the CARS program offers a $3,500 or $4,500 rebate for trading in a used vehicle.  That’s a very tough choice if you would really prefer to support your charity.

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Cash For Clunkers From Uncle Sam

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Apparently Uncle Sam wants to sell you a car. Given auto sales are at crisis levels, Washington is working on ideas to get Americans buying cars again.

The proposal receiving the most interest would give rebates to Americans with old cars to help them buy new ones, in other words “cash for clunkers.”

Under a bill introduced by Sen. Dianne Feinstein, D.-Calif., owners of older cars would get vouchers worth thousands of dollars toward the purchase of newer, more fuel-efficient vehicle. For the costumer to get that cash, the car dealer would have to certify that the trade-in was getting scrapped and not resold. The car’s vehicle identification number (VIN) would be tracked to make sure it never shows up on a vehicle registration again.

Crushing the old car has two benefits. First, it ensures that the consumer’s purchase of a more efficient vehicle actually has a net environmental benefit. Second, it prevents a glut of used cars on the market, which would reduce trade-in values for new car buyers, which would cut into the sales incentive effect.

Many like Tyler Hamilton find the “Cash for Clunkers” program is a good, sensible idea.  However it’s not new and several States have been offering cash for clunkers.

This approach was running in BC as far back as 1996.

The first Canadian vehicle scrappage program aimed at retiring old, “live” (licensed, insured, and in running condition) vehicles was the Scrap-It program, launched in lower mainland British Columbia in 1996. Since then, other initiatives run by not-for-profit organizations have been introduced across Canada.

An example of the current program from Kelowna, Canada is the Scrap It Program

The Scrap-It Program is working to reduce greenhouse gas emissions and improve air quality by getting older vehicles off the road.  The Program offers qualifying vehicle owners incentives to scrap their older vehicle. The incentive values are based on the greenhouse gas reduction that occurs when an old vehicle is scrapped and an incentive is used as a replacement.  Incentives offered at $2000 or more are offered for the incentives with the highest greenhouse benefit. These incentives include very low emission vehicles, transit passes, or the transit pass / bicycle combination.

The BC initiative has several prominent provincial sponsors.

If you know of earlier Cash For Clunkers programs, why not mention them in the Comments.

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