A possible incentive program that would allocate federal dollars to car buyers who trade in their older vehicles for more fuel efficient models is poised for a vote in Congress in the coming weeks.
Nicknamed the “cash for clunkers” bill, the legislation would authorize up to $4,500 to individuals who purchase a new vehicle, depending on the model, that has a fuel economy rating of 20 miles per gallon or better.
The trade-ins would then be sold to salvage dealers who would be charged with destroying vital pieces of the car or truck, including the drive-train and engine, as a way of making sure the gas guzzlers stay off the road permanently.
“I’m always in favor of an incentive that would help sell automobiles,” said Alley’s Chrysler owner Doug Alley.
“But, I would be concerned about the mechanics (of the bill). I don’t have a great amount of confidence in the ability of Congress to put some sort of program out like that that is workable at the dealer level. For instance, if they offer $3,000 to $4,000 incentives, how do you verify that, how do you get the money?”
One version of the bill would have the incentive money transferred electronically to the dealership by a designated government agency. The funds for the program are included in the $787 billion economic stimulus package.
The total price tag to get the program on its feet has been estimated at $4 billion, according to USA Today.
The person buying the new vehicle would not see any of the incentive money directly, but could receive a lower car payment when any incentive money is deducted from the purchase price, a tax write-off if their new car is a hybrid, and they can deduct the sales tax.
“Something like this gets us very excited and stimulates business a great deal,” said Tim Copenhaver, Champion Chevrolet of Johnson City co-owner.
“Keep in mind that the size of the family drives the size of the new vehicle, so something that might be a little more compact but gets better gas mileage might not be in a family’s decision making.
“However, depending on how gas prices fluctuate in the coming months, that could also drive this legislation and the choice for the car buyer. It could benefit a family’s budget to try and get something that can help them save money.”
The bill does not exclude sport utility vehicles or trucks from the guidelines, but consumers and manufactures must be able to prove that the driver will be gaining more miles per gallon with the new purchase in order to get the financial help.
The guidelines include:
• The old SUV or truck must get less than 18 miles per gallon.
• If the new model gets at least two miles per gallon more, the purchaser will get $3,500; if the gas savings are five miles per gallon or more, the amount goes up to $4,500.
• For a heavy-duty model that weighs up to 10,000 pounds, the new automobile must improve gas mileage by one to two miles per gallon.
• Work trucks will not be measured by the gas they use but rather the age of the vehicle being traded in. If the trade-in is a 2001 model or older, the buyer will get a $3,500 incentive.
Although the item-by-item provisions of the bill are still being sorted out by lawmakers and lobbyists who are representing competing auto makers, one version does have incentives only going toward American-made nameplates.
Copenhaver feels that the wealth should be spread around because all of the economy will benefit if all makes of automobile, foreign and domestic, get to participate in the plan.
“I just don’t think it will work unless you get everyone involved in it. Everyone (in the car dealership industry) should have the same advantages and rules, a level playing ground. If it’s built here, and that includes some foreign models, they should benefit,” said Copenhaver.
Sen. Bob Corker, R-Tenn., recently told the Times-News that all car companies, including German-based Volkswagen which is building a multimillion-dollar production plant in Chattanooga, need to be in on the incentives.
“It was highly objectionable in the beginning. I think they were tailoring it to U.S. autos only. Are Nissans in our state, are they not U.S. autos? The Volkswagens that are going to be made down in Chattanooga, are those not made by U.S. workers? They are. So we’re still looking at it. The plus is, it will drive new sales. There’s no question,” said Corker.
Shannon Monroe, of Fairway Ford of Kingsport, said there is more to the car market than just fuel efficiency, and he believes that the American public will continue to drive the market because of wants, not needs.
“There is something about a new car. It has been that way since they started rolling off the assembly line in Detroit years ago,” said Monroe.
“In some cases, I think a person is loyal to a brand because of the family’s car buying history or working with a dealership over the years. Of course, we want to see our models being driven off the lot, but a fuel-efficient car might not be what they are looking for.
“If the bill passes, it’s going to be a plus for us. I think it’s a plus for any car dealer these days, but we’ve always had the impression that the people are going to pull us out of the recession. I don’t think there’s a better way to do that than to buy a new car.”