Motorists Could Get Up To $4,500 To Trade In Gas Guzzlers

Thursday, June 18, 2009, PM | Leave Comment

Attached to a $106-billion emergency war spending appropriation, a $1-billion cash-for-clunkers measure cleared the U.S. Senate today with car dealers and automakers hoping it spurs new vehicle sales in the near future.

Republicans have lost an effort to kill the $1 billion “cash for clunkers” program that offers government incentives of $3,500 to $4,500 to consumers who trade in old gas guzzlers for more fuel-efficient vehicles.

The program is aimed at drawing consumers into auto-dealer showrooms by offering incentives to trade in vehicles that get poor gas mileage. Only models built since 1984 are eligible.

“This is an emergency for families and small businesses for an industry that has been the backbone of our economy for a generation,” said Sen. Debbie Stabenow, D-Mich., who sponsored the proposal.

Opponents said it would increase the federal debt without doing much to get expensive-to-operate vehicles off the roads.

Obama has encouraged Congress to approve the consumer incentives for new car purchases as part of the government’s efforts to restructure General Motors Corp. and Chrysler Group LLC. The bill provides $1 billion for the program from July through November.

The auto industry and its union lobbied heavily for passage of the cash for clunkers plan as GM and Chrysler have received billions of dollars in government-led bankruptcies and the entire auto industry has dealt with plummeting car sales. In May, overall sales were 34 percent lower than a year ago.

Dealers participating in the program would receive an electronic voucher from the government for the trade-in to apply to the purchase or lease of a qualifying vehicle. The bill directs dealers to ensure that the older vehicles are crushed or shredded to get the clunkers off the road.

The program was intended to help replace older vehicles – built in model year 1984 or later – and would not make financial sense for consumers owning an older car with a trade-in value greater than $3,500 or $4,500.

The U.S. industry is expected to generate about 9.5 million vehicles sales in 2009, compared with more than 13 million in 2008 and more than 16 million in 2007.

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