Might want to let Uncle Sam take this off your hands
So here you are, overheating again on the side of the road in 50 degree weather, with your trusty old college car starting to give up the ghost. Problem with your old college car, is well, it was old in college, and you’re now in your 30′s. You’ve wanted to replace it, but it’s worth what? $500? Nope, according to Uncle Sam, it’s worth $4,500 at your local dealer. The House version of this Act passed Tuesday, with the Senate’s version slated to be completed in a week.
Europe pioneered a similar program earlier this year, with great success. Use Government money, inflate the price people can get for their old clunkers, and sell new cars. This not only gets older fuel inefficient cars that pollute more off the road, but it also stimulates new car sales. Given the state of the car industry in America, it’s a good idea that’s worth exploring. Here is how the breakdown works.
If your old beater has a fuel economy value of less than 18mpg, and the new car you want has at least 22mpg, bingo! Here is a $3,500 voucher for your car. Have an increase of 10mpg between the clunker and the shiny new one, and you get $4,500. SUV owners? Increase only 2mpg, and you’ll get $3,500. Increase that number by 5mpg on your new SUV, and you’ll get the $4,500.
Sounds pretty easy, but the devil is in the details here. First off, the combined mileage of the average clunker is usually higher than 18 mpg. Off the bat, regardless of the fact that your specific clunker may be so worn out and out of tune it can barely manage 15mpg, the EPA could say it gets a combined 25 mpg. Sorry, thanks for playing, but do not pass go, do not collect your government dollars. Your old beater has to be a 1984 or newer model year, has to be in running condition, and has to have been insured for one full year.
So who is really going to benefit from this? Well, there are some, but don’t expect the showrooms to be flooded with new car shoppers while their jalopies rust in the parking lot outside. Pickup truck owners, or owners of older, less efficient V8 powered cars can take advantage, but only if they meet the stipulations (and the old grossly overstated EPA estimates from the 1980′s won’t help).
With credit flowing a bit easier, it might be time for many people to contemplate this program. While it’s not going to change too much in the industry, it should be able to give a little needed boost to the sagging sales. Money wise Americans might want to keep their paid off clunkers and not part with a lot of money, or take on payments in an uncertain economy, but couple current fire sale discounts with up to a $4,500 trade in value on an old car, and it might make sense.
The gears of Congress grind slowly though, and it’s doubtful that this Act will be through the House and Senate before the middle of the summer. Passing through the House is step one, so KarFarm will keep you updated to any changes to this bill as it wiggles through legislation.
-KF