Senate Passes Cash-for-Clunkers Bill, President To Sign Soon

June 19, 2009
1994 Buick Park Avenue, by Flickr user Rienk Mebius

1994 Buick Park Avenue, by Flickr user Rienk Mebius

It's a done deal now. Yesterday evening, the US Senate passed a $106 billion war spending bill that includes $1 billion in funds for roughly three and a half months' worth of "Cash for Clunkers" tax credits.

The goal is to assist automakers by boosting US car sales, at the same time encouraging consumers to buy new, more efficient vehicles to replace older cars with high emissions and low gas mileage.

President Barack Obama is expected to sign the bill within a week. The program of electronic vouchers, to be run by the Transportation Department, will go into effect one month after that.

The bill didn't pass without some clunker controversy. The Senate only barely beat back an effort by Senator Judd Gregg (R-NH) to take the funds out of the appropriation for troops in Iraq and Afghanistan. He was defeated, but only by 60 to 36--the bare minimum.

The program will provide electronic vouchers of up to $4,500 to buyers of new cars that get mileage of at least 10 miles per gallon more than the vehicle traded in, which must have an EPA mileage rating of 18 mpg or less. The minimum voucher is $3,500, for a new car that gets at least 22 mpg.

New sport-utilities, pickup trucks, and minivans must get at least 2 mpg more than the vehicle being replaced, which must have been rated at 18 mpg or less, to get a $3,500 voucher. The difference must be at least 5 mpg to get the maximum $4,500 voucher.

DO YOU OWN A CLUNKER? Check Edmunds' list of models considered to be clunkers. Rex Roy also noted that Consumer Reports suggests crushing a Jaguar, a Lincoln, and three Cadillacs as your best bet.

Eligible vehicles were made between 1984 and 2001, and they must have been registered and insured for one year by the current owner (to avoid opportunities for clunker arbitrage).

Dealers must ensure that the engine and transmission are crushed or shredded. But, as our Richard Read reported, car collector groups and salvage-yard operators are somewhat mollified that the entire vehicle need not be destroyed.

As many as 150,000 new cars are expected to be sold using the $1 billion in voucher funds, an aide for Rep. Sutton told Automobile News.  It remains to be studied how many sales would not have taken place without the tax credits.

Similar programs in France, Germany, and even China have produced vehicle sales increases of up to 30 percent.

Pile of junk cars

Pile of junk cars

[Automotive News, subscription required; 1994 Buick Park Avenue photo by Flickr user Rienk Mebius]

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