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June 24, 2009 > Cash for Clunkers causes mixed reaction

Cash for Clunkers causes mixed reaction

By Ritu Jha

Local California auto dealers and trade associations have mixed reactions to the Cash for Clunkers bill approved by the Senate last week.

The legislation intends "To accelerate motor fuel savings nationwide and provide incentives to registered owners of high polluting automobiles to replace such automobiles with new fuel efficient and less polluting automobiles."

''It'll spur car sales in California," said Brian Maas, Government Affairs Director for the California Motor Car Dealers Association. "2009 first quarter sales fell by 43% so we need to turn this around. The Cash for Clunkers bill isn't just for car dealers; it's also for employees and the community and will generate tax revenue."

According to Maas, similar programs in Germany and England have proved successful. "Car dealers will play an active role to implement the bill," he said.

Brandon Hitchman, General Manager of Volkswagen, Auto Mall Parkway, Newark, hopes to sell more cars this year. "The bill's certainly a positive thing for us. Down payments are the toughest thing for people. If a customer has a clunker that may be worth $5,000 or less, then a voucher for $4,000 is a pretty good down payment," said Hitchman. "I think the program would be efficient for the dealership. The first thing the consumer asks about is the down payment; monthly installment is secondary."

A larger down payment also reduces the monthly payment and $4,500 is a significant amount.

"Cash for Clunkers" is a federal bill designed to increase demand for cars and trucks and the fuel efficiency of the US vehicle fleet. The Senate passed the bill (HR 2751 - Consumer Assistance to Recycle and Save Act) on June 11 following the House of Representatives' 298-119 vote in favor of a vehicle trade-in program on June 9. The $1 billion program is expected to last from August to October/November.

However, the California Automotive Wholesaler Association (CAWA) says the bill is flawed and does not favor low-income families. The bill gives incentives of $1,500 to $4,500 to buy a new car.

"How can you get a car for $4,500?" asked Norm Plotkin, CAWA's legislative advocate. "People who turn in their clunker don't have much money to buy a new car," he said, predicting that they will trade-in their vehicle for another old car. "No Ford dealership has a car for $4,500. Low-income motorists can't afford to go with this program."

The bill's opponents also say it will scrap older vehicles that could be more efficient with proper maintenance or replacement of worn engine parts.

"Cars will be scrapped," said Aaron Lowe, VP of Government Affairs for the Automotive Aftermarket Industry Association. "Lots of engines can be purchased and reconditioned, but not under this bill. Engines will go as landfill. This won't benefit the environment and will takes some good cars off road. There's nothing wrong with incentives but this scheme doesn't benefit low-income drivers."

Congressman Pete Stark (D-Fremont) supported the bill saying, "This bill is a chance to get cleaner cars on the road. If it helps people afford fuel-efficient Corollas from NUMMI, then it's worth it."

In California, the law already gives a similar incentive under the Bureau of Automotive Repair's Consumer Assistance Program that pays up to $1,000 to retire or fix a qualified vehicle.

The program's primary goal is to encourage a more timely removal of older, more polluting vehicles from California roads to be replaced with newer, cleaner vehicles or alternative transportation options.

Thomas Evashenk, an engineer with the Air Resources Board, declined to comment on the federal bill, saying only, "I think more analysis is required."

The Board is working on California's Voluntary Accelerated Vehicle Retirement Program to make it more consumer-friendly. "The federal program pays you $4,500 to buy a car new only, that gives 18 mpg and above. The state program doesn't force you to buy a new car and this would benefit low-income drivers," said Evashenk.

Diane Feinstein (D-CA) and several other senators supported an alternative version of the bill. According to her scheme, old passenger vehicles must get 17 mpg or less and only new passenger vehicles with a 24 mpg consumption, or better, qualify. A voucher for $2,500, $3,500 and $4,500 would be given, respectively, for a 7 mpg, 10 mpg and 13 mpg improvement.


Cash for Clunkers legislation provides rebates for cars and trucks in the following categories:

Passenger Cars
The old vehicle must get 18mpg (miles per gallon) or less.
$3,500 voucher for new vehicles with improvement of at least 4 mpg.
$4,500 voucher for new vehicles with improvement of at least 10 mpg.

Light Duty Trucks
The old vehicle must get 18mpg or less.
$3,500 voucher for new vehicles with improvement of at least 2 mpg.
$4,500 voucher for new vehicles with improvement of at least 5 mpg.

Large Light Duty Trucks
The old vehicle must get 15mpg or less.
$3,500 voucher for new vehicles with improvement of at least 1 mpg or trade-in of a "work truck."
$4,500 voucher for new vehicles with improvement of at least 2 mpg.

Work Trucks
The old vehicle must be a pre-2002 model.
$3,500 voucher for new vehicles in the same or smaller weight class.

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