The final “cash for clunkers” program, which was approved yesterday, is an embarassment and will likely be a total failure. Here’s how it works.
If you own a car worth less than $4,500 dollars, you can trade it in for a more fuel efficient auto and receive a voucher worth $3,500 or $4,500. If the car is worth more than that, it doesn’t make sense to take a voucher because the voucher is worth less than the trade in value.
You must have owned your clunker for one year, so no pick ups off Craigslist to flip around for a discount. Your trade in must be less than 25 years old.
The size of the voucher depends on how much you improve your fuel efficiency. If it’s a 10 mpg improvement, then you get the $4,500 rebate. If it’s a 4 mpg improvement, then you get a $3,500 rebate. (See Jalopnik’s handy chart which we we’ve pasted below.)
We find it to be a stretch to believe that anyone driving around in a car that’s worth less than $4,500 can suddenly–in the middle of Great Recession–afford a new car. There’s a reason they’re driving around in a clunker, and no $4,500 discount is really going to do much to change that.
This program, which at one point was supposed to help the environment, has amazingly weak standards. To get a $3,500 voucher for a small truck all you need to do is improve efficiency by 2 mpg. For a heavy truck, it’s just 1 mpg. For a big work truck that’s from before 2002, all you have to do is buy a new truck.
In Europe where a similar program was created, neither drivers nor the auto industry want the discount to ever disappear. Who can blame them?
The U.S. program is expected to cost $1 billion, which covers 250,000 cars. The program runs from July to November. If it’s a success it might be extended. So, let’s hope it fails.
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