Obama Backs Cash for Clunkers Legislation

President Barack Obama stated during a speech regarding the auto industry this morning that he backs a form of incentives for car buyers who trade up from aging, inefficient vehicles to more fuel-efficient ones.

He specifically mentioned current legislation in need of funding — bills introduced in the Senate in January and House in March that would provide vouchers of up to $7,500 for people giving up their old clunkers. The voucher would be good for use toward either the purchase of a new car or for public transportation.

The Senate bill’s co-sponsor, Susan Collins (R-Maine), says it would help reduce dependence on foreign oil. The plan would operate for four years and is projected to take a million vehicles a year off the road. Buyers would have to purchase a car that is both 25% more efficient than federal guidelines and is a 2004 model year or newer. We’re not sure which numbers regulators would use to determine fuel efficiency, because CAFE figures are not published on car window stickers. The government would likely release a list of eligible vehicles that vouchers could be applied toward.

Theoretically, the money from the government would be more than a dealer would pay for an older car or SUV a buyer would bring as a trade-in.

There are a lot of practical issues we have with such a plan, starting with which cars would be eligible. The other is the fact that the plan isn’t limited to only new cars. With the recent economic struggles, demand for used cars is up, while new-car sales continue to fall. If an added benefit of this program is to help struggling automakers, making it available on the purchase of cars going back to the 2004 model year lessens the impact on new cars purchased.

The president said the plan would be retroactive to today. We’re not sure what that means, either, given there’s no voucher plan in effect. We assume he means that any car purchased from today onward would count, and you could take your old clunker in to get a voucher after the fact. We’ll update this post when more information is known.


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