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The new “cash for clunkers” law is expected to go into effect by July 24, just 30 days after it was signed by President Barack Obama.
The National Highway Traffic Safety Administration must develop program guidelines for the new law, officially called the Car Allowance Rebate System.
Consumers can trade in certain vehicles with low fuel mileage and receive an incentive of $3,500 or $4,500 toward the purchase of a new, more fuel-efficient vehicle.
The program runs from July 24 through Nov. 1, unless the $1 billion appropriation runs out before then.
The voluntary program for new-car dealers was approved in the hope of spurring new-car sales.
However, the program decrees the trade-ins be scrapped rather than re-sold.
Auto manufacturers, the National Automobile Dealers Association and the American International Automobile Dealers Associations all supported the bill. The National Auto Auction Association, the National Independent Automobile Dealers Association and various aftermarket trade groups lobbied against it.
The Automotive Recyclers Association also criticized the legislation since the program will prohibit the recycling and re-use of the engine or drive train.
“The more successful the program, the more disruptive it would be to the lower-end market,” said Tom Webb, Manheim’s chief economist.
His concern was that the measure would take millions of used vehicles out of circulation, making a major impact on the lower-end market.
However, there are questions over how many people will use the new law to buy a new vehicle. CNW Marketing Research projects the new law will only create 250,000 additional sales.
The main hurdle is the consumers’ ability to obtain financing.
“The people who would qualify for a replacement used-vehicle loan would not qualify for a new-car loan so they are unable to take advantage of the’ Cash for Clunkers’ effort,” a CNW report stated.
Under the program, a consumer would have to purchase a passenger car with a minimum of 22 mpg, a light-duty truck with at least 18 mpg or a large light-duty truck with at least 15 mpg.
To qualify for the $3,500 voucher, the new passenger vehicle would have to get at least 4 mpg more than the trade-in. A new truck would have to get at least 2 mpg more than the trade-in.
For a $4,500 voucher, the new passenger car would have to get 10 mpg more than the trade-in, the new light-duty (or large light-duty) truck would have to get at least 5 mpg more than the trade-in.
Work trucks must be a 2001 model or older to trade-in for the $3,500 voucher - there are no fuel economy requirements. |
