Consumer Car Buying Advice Blog

Senators Feinstein Collins and Schumer introduce the Cash for Clunkers bill to encourage the trade in of older and less fuel efficient vehicles.

Credits given when you trade in your gas guzzler

On January 14th, U.S. Senators Dianne Feinstein (D-Calif.), Susan Collins (R-Maine), and Charles Schumer (D-N.Y.) introduced a bill that would establish a national voucher program designed to encourage drivers of older and less fuel-efficient vehicles to trade them in for, you guessed it, newer and more fuel-efficient means of transportation.

According to Senator Feinstein’s office, “the so-called Cash for Clunkers program would reimburse drivers with a credit of $2,500 to $4,500 for drivers who turn in fuel-inefficient vehicles to be scrapped, and purchase a more fuel efficient vehicle. The traded-in vehicles must have a fuel economy of no more than 18 miles per gallon, be in drivable condition, and have been registered for at least the past 120 days. Vouchers could also be redeemed for transit fares for participating local public transportation agencies. The program would operate for four years, from 2009 – 2012, and is expected to encourage the early retirement of up to one million vehicles per year.”

Encouragement needed

According to Senator Feinstein, it’s one thing to pass laws for tougher fuel economy standards and quite another to convince drivers – especially given the current state of the economy – to trade in their current vehicles for one of those more fuel efficient models that have just been legislated into existence.

The current bill, if enacted into law as it now stands, would create a voucher program that would reimburse drivers who trade in their old cars, trucks and SUV’s with a coupon of $2,500 to $4,500, depending on the fuel efficiency of the purchased car.

There is one more thing. Car owners participating in the program would also have the option of swapping their old cars for vouchers to ride their local bus or subway for free. So even if you happen to live in the Big Apple, you can still participate in the good Senator’s program.

Program Specifics

We all know that this would be good for the environment, as it would save on the importation of oil, reduce greenhouse gas emissions as well as reduce nitrogen oxides and the press information goes into great detail explaining this. But if you’re like the rest of us here at Auto Credit Express, what you really want to know is how much money is involved and how can you get your hands on it, right? We thought so. So here it is:

Eligible drivers would receive a reimbursement voucher for the purchase of a new or used vehicle with a fuel economy rating that exceeds the CAFE target for that class of vehicle by at least 25 percent. The bill also requires that the voucher be used towards the purchase of a vehicle that has an MSRP of less than $45,000, is model year 2004 or later, and meets or exceeds federal emissions standards. Vouchers could also be redeemed for transit fares for participating local public transportation agencies.

Drivers who apply for the program must ensure that their vehicles turned in for scrapping match the following criteria:

- Vehicles must be in drivable condition;

- Be currently registered in the U.S.; and

- Have a when-new fuel economy rating of less than 18 miles per gallon (as reported by the original manufacturer for purposes of CAFE compliance).

The bill specifies that during the first year of the program, vouchers will be issued for the following amounts:

For traded-in vehicles that are model year 2002 and later, drivers would receive a voucher for:

- The purchase of a new vehicle: $4,500

- The purchase of a used vehicle: $3,000

- Transit fare credit: $3,000

For traded-in vehicles that are model year 1999 – 2001, drivers would receive a voucher for:

- The purchase of a new vehicle: $3,000

- The purchase of a used vehicle: $2,000

- Transit fare credit: $2,000

For traded-in vehicles that are model year 1998 and earlier, drivers would receive a voucher for:

- The purchase of a new vehicle: $2,000

- The purchase of a used vehicle: $1,500

- Transit fare credit: $1,500

In each subsequent year (2010, 2011, and 2012), the model years would be advanced by one year. Vouchers would be eligible for redemption for up to two years after the date of issuance, and no individual would be eligible to obtain more than one voucher in any three-year period. Dealers, dismantlers and scrap recycling facilities would also be eligible for a payment of $50 per vehicle, or an alternative amount to be specified by the Department of Energy.

The Bottom Line

While there are still a number of points about the program that remain unclear, not the least of which are how and where the vouchers can be cashed and who would oversee the program to eliminate the possibility of fraud, it certainly is an intriguing idea.

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