The Cash for Clunkers (C4C) program is on its way to Senate approval, as your elected representatives have attached the bill to the $106 billion military spending bill. As the Detroit News reports, the C4C rider sallies forth into legislative battle in the same form as the House version: “Under the program, owners of cars rated at 18 mpg or less in combined highway and city mileage could turn them in for a cash voucher. Buying a new car rated at least 4 mpg higher would earn a $3,500 voucher; a 10 mpg improvement would earn a $4,500 voucher. Pickups would be eligible as long as the new vehicle has a mileage rating of at least 18 mpg and is at least 2 mpg higher than the old vehicle. A new truck rated at least 5 mpg higher than the turned-in vehicle would earn a $4,500 voucher.” One problem: the feds are not planning (i.e., budgeting) for success . . .
The $1 billion set aside for the auto-purchase program is far short of the full cost of such an effort, estimated at $4 billion. The $1 billion is expected to fund the program through Sept. 30, the end of this fiscal year, according to two congressional sources close to the negotiations who asked to remain anonymous. This week, Sen. Debbie Stabenow, D-Lansing, who sponsored the Senate version of “cash for clunkers” legislation, said she was comfortable with winning approval for money to start the program, with the idea that additional funding could be approved later.
In other words, the Congress is hiding the true cost of this program from the American taxpayers. In fact, I wonder from whence that $4 billion estimate arrived. What if it’s twice, five or ten times as much? Would it still receive unqualified political support? Depressingly enough, yes, it would.
Requiring action, but not funding or massively underfunding it is a pretty common tactic with Congress. Even the “well-funded” DoD gets this kind of shaft a lot, which means taking funds from other programs to fund the requirements of Congress. Because “you didn’t give us the money” isn’t an excuse.
Not to mention, a translation of the meaning of the numbers: “if you were a bad boy before, you are being rewarded. However, if your clunker had good fuel economy and you’ve helped your nation in its quest for lower emissions and less oil imports, well, then go screw yourself”.
This may not cost as much as you think. The threshold to qualify for a car is a clunker rated at 18 mpg or less. I looked up my 93 Crown Victoria – its combined rating is 19, even adjusted downward to compare with current figures. So, if my 93 Vic will not qualify for the voucher, what will? Town Car rated same as the Vic. Looks like they can retitle this “Lets get all GM rear wheel drive sedans off the road” act, because I’m not sure what else qualifies aside from Roadmasters and Fleetwoods. And, how many of the people with these cars in 2009 can afford a new car anyhow?
I don’t know which is worse, a properly-funded, crappy cash-for-clunkers bill, or a vastly underfunded, crappy cash-for-clunkers bill.
So the Senate bill costs 75% less than the House bill and you’re upset why?
In fact, I wonder from whence that $4 billion estimate arrived.
((3500 + 4500) / 2 ) * 1 million
If it were to pass at whatever level, it’s not clear whether they’d extend it at all past the funding limit set in the bill. If you recall, the same thing happened with the coupons for digital set top boxes — the reason they extended the deadline is that the program had run out of cash.
Hybrid tax credits, for example, have unit limits attached to specific dollar amounts for specific vehicles. It’s entirely possible for a bill to set forth a time limit for a program and reach the end of the program before the time has expired. I actually think that would be a good thing in this case, because it would front-load the activity as much as possible and discourage people from speculative purchases of junk right now and trying to wait out the year of use required to get the voucher. If the funding limit is held to, someone trying that might be left holding the bag because the cash for the program would be gone before they’d owned their new clunker for a year.
I dont understand…people complain all day that the government is spending way to much on needless programs…and now here they are showing restraint…….and your upset because they didnt spend enough?!
I see this as a great idea. In September reevaluate the program. If its successful give it more funds. If it failed cut the funding.
sounds like people want to complain simple because they like to hear themselves talk (see themselves type)
@ jpcavanaugh
A good chunk of the clunkers they’re looking to crush are of the OJMobile type – light trucks with mid 80s emissions technology.
As for passenger cars, a good many full size vehicles meet the threshold.
You have to think that the biggest response is going to come when the vehicles are worth the least – generally meaning the oldest vehicles. A ’93 Crown Vic is relatively young and efficient compared to a vehicle a decade older. For example, an ’85 Crown Vic is rated at 17 mpg. Cop/taxi version is even worse.
“I’m not sure what else qualifies aside from Roadmasters and Fleetwoods.”
Answer: Trucks and SUVs, lots of them. This is a thinly disguised program to boost demand in the one segment where US based companies still have the lions share of the market. Almost all of the qualifying vehicles are older trucks and SUVs. Ditch them for a car and the new car has to be on the very high end of the fuel economy range. BUT, ditch them for a new truck or SUV and the bar is much lower. The Detroit News piece only mentioned pickup trucks for the second, lower bar category. But, the actual bill says pickup trucks AND SUVs.
http://www.businessweek.com/bwdaily/dnflash/content/jun2009/db20090611_409752.htm?campaign_id=yhoo
Check out some numbers on fueleconomy.gov.
1993 2wd Explorer – 17 mpg (wow, it makes the cut!)
2009 2wd Edge – 19 mpg (amazing, it makes the cut too!)
1993 F150 V8, Auto-4 – 15 mpg
2009 F150 V8, Auto-6 – 17 mpg (guess what, another $3500 winner!)
I bet Ford was pushing very hard for this version of the bill.
Ditch them for a car and the new car has to be on the very high end of the fuel economy range. BUT, ditch them for a new truck or SUV and the bar is much lower.
That’s not true at all.
The minimum MPG for a passenger car is 22 mpg. To give that some context, a 270 hp V6 Camry gets 23 mpg.
2009 F150 V8, Auto-6 – 17 mpg (guess what, another $3500 winner!)
No, light trucks need to get at least 18 mpg.
long126mike
OK, take an 85-91 Vic that would qualify for the voucher. How many are still on the road? Not many. If the goal is to get these cars gone now, then just offer money for owners to turn thme in. Even if you don’t do that, these cars are going away relatively quickly and will soon be virtually out of everyday service.
Then, how many owners of these folks are even remotely in a position to buy an new car? Not very many, I’ll wager. And those who do will need a 5 speed Focus take maximum advantage of the voucher. Not very doggned likely.
This bill is political grandstanding. Is it to stimulate car sales? Or is it to improve the in-service fleet average? If it is the former, just issue the damned vouchers and let people buy cars. If it is the latter, just be honest and raise gas taxes. But to issue a press release to make everyone think that you support a boost to the auto industry while writing the law to exclude virtually every non-truck vehicle in the fleet, is dishonest.
Ugh, this is such a bad idea. Whatever they think this is going to accomplish, they are wrong.
About the only things this will accomplish are:
– artificially elevating sales in the short-term. It doesn’t sound like it’ll even be enough to make a difference. Though I don’t know if I prefer my bailouts in the form of loans that are likely never to be repaid or as credits that help people get new cars.
– adding more to the total that will be paid (in taxes) my children’s children’s children (etc…).
I honestly don’t know if we would be in a better or worse place without the auto and the bank bailouts, but this is ridiculous. More examples of rewarding bad behavior and doing nothing real to deter it in the future. In fact, they are doing just the opposite. Proving that greed is good, because if things go wrong, the government will come in and save the day.
Since when did we live in a socialist country (and don’t say Obama, because this started before he was elected).
So, if my 93 Vic will not qualify for the voucher, what will?
My cubicle neighbor has an 01 Aztec and yes, it’s as craptacular as its reputation.
It doesn’t qualify either at 19mpg combined. As you said, if an Aztec doesn’t qualify, what will?
My 93 4WD Explorer! Hooorah for me! Oh wait, it’s a beater used as a farm vehicle (even tho it’s licenses). It’s great at what it does. Decisions, decisions.
Or it could be a push to get everyone out of big RWD sedans and SUVs and into penalty boxes (with less emissions and better mpg of course) making all the emissions and mpg people (and politicians) happy.
Wait, now I’m confused. I thought the mpg difference was based solely on what clunker you were unloading. Use my 93 4WD (V6, manual) Explorer as an example: combined mpg 17.
I thought that meant I could purchase *any* vehicle that combined 19 mpg would get 3.5K. Reading the above indicates that the 19 mpg goal is only if I replace the Explorer with another SUV or truck. Right?
How many are still on the road? Not many. If the goal is to get these cars gone now, then just offer money for owners to turn thme in. Even if you don’t do that, these cars are going away relatively quickly and will soon be virtually out of everyday service.
You must not be exposed to people with lesser means. I can assure you, PLENTY of these vehicles are alive and well and will continue to be used for many years.
Ever heard the term “winter beater”?
Is it to stimulate car sales? Or is it to improve the in-service fleet average? If it is the former, just issue the damned vouchers and let people buy cars.
These programs usually have multiple objectives – raising fleet fuel economy, improving fleet emissions, economic stimulus, and social equity. The reason it’s being passed now is for the third reason. The reason the “issue the damn vouchers” isn’t pursued is because it wouldn’t meet the other three objectives.
A recession is a period of underutilized economic capacity. So if the government is giving out vouchers for $3,500-$4,500, keep in mind someone is going to use that as part of a bigger purchase price, as the cheapest new car is on the order of 10Gs. That’s 10Gs or more added to GDP that otherwise wouldn’t have been there.
It also increases receipts to cash-strapped states with more new vehicle registration fees. And so forth.
Too many people focus on costs to the exclusion of benefits, or when they’re against costs, they fail to see the other costs that pop up in its place.
Is such a bill going to transform the world? Of course not – it’s not meant to. But it doesn’t mean it’s a bad bill.
I think it should be illegal to hide pork and other items attached to other bills. Every spending bill over $1M should be voted as a separate measure (stopping the bridge to nowhere pork). For those items under $1M they can be combined with other small bills under $1M so they can be voted on together.
Actually, I feel cheated that my clunker, a 1996 Volvo, averages about 24MPG in mostly city driving. What the bill needs is a clause that provides an incentive for anybody to trade in for a more fuel efficient vehicle, as long as it meets a minimum threshold (the 19 MPG) or as long as it gets at least X MPG (I’m thinking 4) more than the car being traded. This would mean I’d have to buy a car that gets 28 MPG to get cash for my Volvo.
Seriously, I’ve often thought I’d keep my Volvo until it is wrecked or stolen, but a $4,500 incentive would get me into new wheels pretty quickly.
Oops I guess I missed the part where giving people tax dollars to buy imports is going to revive domestic car manufacturing and create jobs in the USA.
Wait, now I’m confused. I thought the mpg difference was based solely on what clunker you were unloading. Use my 93 4WD (V6, manual) Explorer as an example: combined mpg 17.
I thought that meant I could purchase *any* vehicle that combined 19 mpg would get 3.5K. Reading the above indicates that the 19 mpg goal is only if I replace the Explorer with another SUV or truck. Right?
Here’s the text of the bill that passed the House:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h2751ih.txt.pdf
I can’t seem to locate the defense authorization bill amendment at the moment, but it’s likely the language is the same except for the funding limit of $1 billion v $4 billion.
There’s three things involved:
* Maximum MPG of the “clunker” is 18 mpg. Applies to all vehicle types.
* Minimum MPG of the new vehicle is 22 mpg for passenger cars, 18 mpg for light trucks (trucks, SUVs, and vans), and 15 mpg for category 2 trucks. Category 3 trucks simply have to be new vehicles and the “clunker” has to be MY2001 or older. Class 3 vouchers can only comprise 7.5% of the vouchers issued.
* MPG difference – for the $3,500 voucher, 4 mpg for passenger cars, 2 mpg for light trucks, and 1 mpg for class 2 trucks. For the $4,500 voucher, those numbers are 10, 5, and 2, respectively.
So, you’re right. If you wanted to get 19 mpg, the only option would be getting a $3,500 voucher and applying that to a new light truck, with the clunker rated at no more than 17 mpg. New category 2 and category 3 trucks can only be vouchered if the clunker is the same category of vehicle. So you couldn’t trade in a 13 mpg Bronco and get a category 2 truck and get a voucher for that.
Oops I guess I missed the part where giving people tax dollars to buy imports is going to revive domestic car manufacturing and create jobs in the USA.
Even if one buys a vehicle manufactured overseas, it still creates domestic economic activity. Shipping the vehicle, the dealer, state tax receipts, bank loans (most likely), etc.
Other bills have had “USA made” clauses, but as some have pointed out, that would likely violate terms of trade agreements in place.
@ findude
Yep, yours is the kind of objection that’s frequently heard from environmentalists. It’s the reason there’s been resistance by many to these specific bills.
example:
http://www.ucsusa.org/clean_vehicles/solutions/cleaner_cars_pickups_and_suvs/cash-for-clunkers-can-help-auto-industry-and-environment.html
I haven’t followed this closely, but there have been tons of these proposals in various forms. Apparently the ones they’re passing now were the most palatable to get the bills through, particularly in the Senate.
Realize, though, that you going from 24 to 28 mpg saves less fuel than someone going from 18 mpg to 22 mpg. The former saves 60 gallons per 10K miles, the latter 101 gallons, or 70% more.
My mistake.
It’s a bailout for irresponsible SUV owners.
First they bought gas guzzling SUVs. Then oil prices rose, GM went bankrupt and the guzzlers needed to be unloaded.
Which the government is conveniently taking care of in this measure.
So the message is: party-on with gas guzzlers, the government will pick up the tab!
Those prudent people (like myself) who bought more modest vehicles way back when are now being punished.
The irresponsible get the bucks, the prudent ones are left empty-handed.
How fair is that?
One more unintended consequence.
Potentially, a large number of people that would not ordinarily qualify for a new car loan will suddenly have a 3500-4500 down payment.
How many of these will end up defaulting because even though they will suddenly “qualify” they will still have poor money management skills?
Hmmm…a new form of Gov’t sponsered “easy credit” (unintended)?
Isn’t this part of the reason the country is where it is now in the first place?
Oh well.
Bunter
The 18 mpg minimum for the new vehicle only applies if the new vehicle is a car.
You mean light truck, not car.
How many of these will end up defaulting because even though they will suddenly “qualify” they will still have poor money management skills?
I don’t know – how many? Do you think poor money management skills are an attribute unique to poorer people or something? If the loan amount is less, then of course it’s less likely they’d default than if the amount were more.
Hi (long126) Mike,
I did not specify an economic level- you did.
The fact is that many people, at various income levels, have lost the ability to obtain these loans because of “poor money management skills”.
Having been raised on the lower middle-class/poor border line (sometimes we were over sometimes not) I am well aware that money management skills among the lower incomes can be very good-it is a survival skill. But those folks are not likely, IMO, to be the ones looking at new cars.
The potential certainly seems to exist for many of them to be “back in play”.
Yes, I recognize the loan size will be lower.
Certainly this will reduce some of the risk.
How much? Of course we can only conjecture.
This may not prove to be an issue. However I think the question is worth looking at.
Merely deriding it (and reading in what isn’t there) scarce answers the query.
Just some thoughts.
Cheerio,
Bunter
Other bills have had “USA made” clauses, but as some have pointed out, that would likely violate terms of trade agreements in place.
As John pointed out above, the bill as it’s currently written more or less does just that by making the voucher qualifications lower for a vehicle segment still dominated by the Big 2.8.
Oh sure, I could buy a Pontiac G5 and most likely get a 4.5K voucher but why?
As John pointed out above, the bill as it’s currently written more or less does just that by making the voucher qualifications lower for a vehicle segment still dominated by the Big 2.8.
The bigger point being that apparently you can only replace within the same vehicle segment. So no junking that Detroit truck for a compact sedan; nope, you’ve got to replace it with another truck.
At least, that’s what people seem to be saying. It sounds crazy, but it makes sense from the perspective of “how could the bill be tweaked to benefit Detroit without being too obviously discriminatory on its face.”
The bigger point being that apparently you can only replace within the same vehicle segment.
Why say “apparently” when you have the bill to look at? There is zero requirement regarding staying within the same segment for light vehicles.
@ Bunter1
The legislation specifically limits new vehicle prices to $45K and below, and obviously a disproportionate number of people driving beaters on a regular basis are quite poor relative to the norm. So it’s clear who we are speaking about, by and large.
As for the financing, I feel that’s a red herring. Banks are still going to look at the things they always look at – the principal, the terms of the loan, ability to pay (usually in the form of verifying income), and credit rating. There’s nothing in this bill which mandates that banks somehow lower their lending standards for people who pay for part of their new vehicle with a voucher.
One could go into a bank and ask for a $100 loan and still get turned down. The amount of the loan isn’t relevant. It doesn’t change lending standards.
How much of a car counts as a car? If I rip out all the faux- wood trim pieces, chrome, stereo, hubcaps, spare tire, floor mats, and everything else that doesn’t contribute directly to the movement of the car out of my ’78 Impala and sell the pieces on e-Bay, do I still qualify for my $4,500 in government moolah to use towards the purchase of a new V-6 Camaro?
If I rip out all the faux- wood trim pieces, chrome, stereo, hubcaps, spare tire, floor mats, and everything else that doesn’t contribute directly to the movement of the car out of my ‘78 Impala and sell the pieces on e-Bay, do I still qualify for my $4,500 in government moolah to use towards the purchase of a new V-6 Camaro?
No, because a vehicle must be MY1984 or younger.
Duh, okay. If I rip out all the stuff that doesn’t directly affect the drivability of my 1984 Impala, can I still get the handout?
My point is that it’s an invitation to scam. It’s like the guy I work with who went around to all the pawn shops in town, bought all their junk $25 – $50 pistols (this was a dozen years ago, before Obama panic drove the price of firearms and ammo into the stratosphere) and turned them all in at the PD’s gun buy back program for $100 a piece. He netted close to $5,000 of tax payer cheddar. And my PD hasn’t had a gun buy back since.
Duh, okay. If I rip out all the stuff that doesn’t directly affect the drivability of my 1984 Impala, can I still get the handout?
Seems like it.
Not sure why you think there’s scam potential, because there’s a limit of one voucher per person. People can’t just go out and buy a bunch of junkers and then grab vouchers and resell the vouchers.
The person getting the voucher has to prove they’ve titled, insured, and driven the vehicle for at least one year prior to getting a voucher, and the program only lasts one year and has a funding cap. Anyone who hopes to squeak in at the last minute risks seeing the funding for the program run out, which if the response in Europe is any indication, means lots of people will get in on it as soon as possible, if they’re thinking of possibly getting a new vehicle.
BTW, here’s a list put out by Consumer Reports – “Cash for clunkers: The best gas guzzlers to junk”
“The used cars we’ve listed are the newest vehicles likely to be available for less than $3,500, the minimum voucher value. For this to be worthwhile to the consumer, the vehicle’s trade-in value would need to be less than the voucher. Older versions of these vehicles are likely to be worth less, making the vouchers even more appealing. Many of the models have mechanical twins sold by another brand that may qualify, but we have not listed them here.”
http://blogs.consumerreports.org/cars/2009/06/cash-for-clunkers-the-best-gas-guzzlers-to-junk.html
Full sized pickup trucks and SUVs appear to be “category 2” vehicles based on the referenced EPA document: “Light-Duty Automotive Technology and Fuel
2 Economy Trends: 1975 through 2008’ http://www.epa.gov/oms/cert/mpg/fetrends/420r08015.pdf
Category 2 vehicles in the house bill are Large Trucks as defined by the referenced document. That document categorizes large trucks as those trucks, vans and SUVs with a wheelbase greater than or equal to 110″ for an SUV, 115″ for a pickup and 124″ for a van. For reference, an Explorer has a 113″ wheelbase and and F150 starts at 125″. Thus, Explorers and F150s (as well as Tahoes, Silverados, Rams & Tundras) are all “category 2″ vehicles for purposes of the House C4C bill. The Ford Edge is a 111” wheelbase SUV. Tada, a category 2 truck!
The minimum fuel economy for the new category 2 replacement vehicle to qualify is only 15 mpg. So, as I said in my post near the top of this thread, a New F150, Edge, etc. all would qualify.
Now for a particular example: Turning in my personal 1989 F150 (15 mpg) on a new 2009 F150 (17 mpg) would indeed qualify for a $4500 voucher. Turning our 1993 Volvo 240 (20 mpg) in for a new Fusion Hybrid (39 mpg) would mean a $0 voucher. We put about 1,500 miles per year on the F150 and about 10,000 miles per year on the 240. The fuel saved by upgrading the F150 would be just under 12 gallons per year. The fuel saved with the 240 to Fusion hybrid switch would be over 240 gallons. Looks like we will be keeping both of them :).
The big winners under this deal are people who trade in an old SUV or truck on a new SUV or truck. The politicians managed to build a strong buy American incentive into the deal without actually using those words.
@John Horner
Great research!
I didn’t fully look at what they meant by category 2 trucks. I’m used to the nomenclature of “light trucks” meaning basically all normal SUVs, vans, and trucks, and just assumed cat2+ referred to things that exceed GVWR of 8,500 lbs.
I guess the thing that should have tipped me off is that there are no EPA ratings for such vehicles.
The big winners under this deal are people who trade in an old SUV or truck on a new SUV or truck. The politicians managed to build a strong buy American incentive into the deal without actually using those words.
There you go – that’s the main intent of the bill. I think people are making a mistake in thinking it’s primarily about energy savings or emissions reduction. The main point is it’s a form of economic stimulus, with the individual beneficiaries mostly concentrated in lower and middle classes, and as you deduce, they are able to make it give American vehicles more of a chance than an aggressive fuel economy target would. If it were only limited to trading in junkers for high FE hybrids, the domestics would be mostly screwed – as all they really have at this point are the Escape Hybrid and its variants and the Fusion Hybrid.
Heck, if they put the threshold at 30 mpg, they’d still be mostly screwed.
Personally, I predict that most of the vouchers will be for beater old passenger cars. Why? Because beater old trucks can maintain their usefulness for much longer, even if they don’t hold much value. It’s like in your case – a lot of people keep one around for occasional work.
Why say “apparently” when you have the bill to look at? There is zero requirement regarding staying within the same segment for light vehicles.
Sorry, you’re right, though there’s a pretty hefty incentive for doing so, though, as you seem to have realized later. You’re right, you don’t have to stay within the same category, but if you do, the target fuel economy you have to reach is a lot lower.
think people are making a mistake in thinking it’s primarily about energy savings or emissions reduction. The main point is it’s a form of economic stimulus, with the individual beneficiaries mostly concentrated in lower and middle classes, and as you deduce, they are able to make it give American vehicles more of a chance than an aggressive fuel economy target would.
The main point, yes, but not the only one. If you just wanted to do economic stimulus, you could give money to the lower and middle classes and not have to worry about the fact that, e.g., you’re not giving anything to people who are actually too poor to own cars or choose not to.
Personally, I predict that most of the vouchers will be for beater old passenger cars.
1984 and later passenger cars with an EPA combined fuel economy of 18 MPG or less? (see pages 18 and 19) How many cars does that cover? Sure, 8 cylinder Mustangs (but not 6 cylinder and 4 cylinder models), the 1985-1992 Crown Vic (but not since then), the 1985-1999 Cadillac Seville (but not since then), etc., but honestly I’m not sure that it’s that many. I think a far greater percentage of trucks are eligible.
It would be even more ridiculous if they had set it to “less than 18 MPG” instead of allowing 18 MPG to qualify.
You can see the final version by looking up HR 2751:
http://thomas.loc.gov/cgi-bin/query/F?c111:6:./temp/~c111GqtAB8:e141116:
“TITLE XIII–CONSUMER ASSISTANCE TO RECYCLE AND SAVE PROGRAM” is the section of interest.