Bailout Watch 562: Cash for Clunkers Awaits Obama's Signature

Edward Niedermeyer
by Edward Niedermeyer

A cash-for-clunker bill, “stripped down” to $1 billion, has passed the Senate. Automotive News [sub] reports that the new bill will go into effect one month after it is signed by the president and will offer $3,500-$4,500 rebates only through November. The spending cap had been set previously at $4 billion. Sen. Judd Gregg [R-NH] led an attempt to strip the provision from an Iraq funding bill that was voted down along party lines. Meanwhile, the AP bemoans the “flagging clout” of the auto industry. And Autocar points out that total European car sales across all brands were down 4.9 percent compared to May 2008. Yes, the much-vaunted European scrappage schemes helped . . . Hyundai (+25.1 percent), Suzuki (+3 percent), VW (+3 percent) and Fiat (+2 percent). Everyone else . . . not so much.

Edward Niedermeyer
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  • Dingram01 Dingram01 on Jun 19, 2009

    I'm mulling this over, as a potential ideal target for this incentive. But several considerations, so far, serve to blunt the effectiveness for my budget. Take my example. My 1995 BMW 540i (6 speed) has 190,000+ on the dial. Rusty doors and bad paint. Interior is fair at best. Despite its being a mechanical rock (in the good sense -- everything works, and well), I'd expect to get far less for my car on the open market than the possible $4500 through this program. But consider: * no doubt, I'd be taxed on this $4500 as income * I'd have to buy a new car (I assume), not certified used, which would expose me to interest and depreciation costs * My city's property taxes would rise on this car * My insurance would climb, though perhaps moderately * Though a new car shouldn't be costly to maintain, on the other hand I do my own work presently so only am out parts costs I think given the costs associated with both the cash incentive and the new car, much of the value of the incentive is lost. After factoring in interest, taxes and depreciation, I might still do better financially if I were simply to sell my car. This assumes my decade-long practice of buying used cars for cash would continue. It might brighten the picture if I planned to retire from shadetree repairs and seek out a stable monthly payment and a warrantee. I have much mulling still to do. I wouldn't mind getting out of this particular car for the maximum cash possible, but I don't relish the idea of a five year servitude. A lower gas bill is attractive, but a look at what's out there in my new-car budget is depressing. Right now, I admit I'm 50/50 on the idea for me personally. That, of course, leaves out any political opinions I have about the measure.

  • Walkwalkfast Walkwalkfast on Jun 19, 2009
    5.) The US program is an underfunded truck and SUV rescue act. It will do nothing to passenger car sales. Well this is a nice how-do-you-do(?) from the United States Gov't. While I'm not exactly strapped for cash and I have solid credit, knowing that I'm virtually excluded from even making a lateral move, subcompact-to-sub, will be nearly impossible. I guess I'll have to spit in the collective Obama-Feinstein-Green Warrior of the Earth United eye.
  • Simonefas Simonefas on Jun 19, 2009

    I don't qualify because my car already gets good gas mileage. My dad swears by the car buying process here: It is kind of similar. I haven't tried it yet, but I might because it looks good. I have a feeling dealers are going to automatically increase prices because of the increased demand (artificial) for lower MPG cars. So the thousands of savings from this bill for consumers is not entirely accurate. The demand will increase prices and you'll get a voucher from increased prices. I'm certain some markets you'll come out even as if they never offered this voucher. It is poorly written legislation.

  • Dr. No Dr. No on Jun 20, 2009

    I wish I had purchased a clunker for $50 2-3 months ago and waited, prior to the scheduled expiration of the program, to claim the voucher. You need to be the registered owner for a year, but because the program doesn't last a year, you can't buy a junker today and have 12 months of ownership. To some earlier posters w/misconceptions about the plan: I don't believe this is taxable income to the purchaser. You have to buy a NEW car or truck The car traded in has to be junked. Oh well, some of you caught a windfall, but I don't think it's going to make much difference to dealers.