Cash for Clunkers and Bad Credit Car Loans
by Steve Cypher on Monday, June 22nd, 2009The cash for clunkers bill may or may not help that many bad credit car loan shoppers.
The Supplemental Appropriations Act, 2009
The Supplemental Appropriations Act, 2009, otherwise known as the Consumer Assistance to Recycle and Save Act of 2009 or, more commonly, the “Cash for Guzzlers” bill, finally passed both the Senate and the House of Representatives this week. Many in the auto industry hope that it will lead to a boost in car sales much like it did in Europe, where an R.L. Polk study determined that, in 9 countries, half a million additional new vehicles were sold during the first 5 months of the year because of similar incentives. So how does the bill work?
Qualifying vehicles
In order to qualify as a “guzzler”, the trade-in vehicle must be less than 25 years old (1984 and newer) and, according to EPA data, have a combined fuel economy value of 18 miles per gallon or less.
The transaction will qualify for a $3,500 voucher if the new passenger vehicle being purchased has a combined fuel economy of at least 4 miles per gallon more than the trade-in vehicle or a $4,500 voucher if the new passenger vehicle has a combined fuel economy of at least 10 miles per gallon more than the trade-in vehicle.
If you’re buying a truck, the numbers are a little more lenient. Transactions will qualify for a $3,500 voucher if the new category 1 truck has a combined fuel economy of at least 2 miles per gallon more than the trade-in or a $4,500 voucher if the new category 1 truck has a combined fuel economy of at least 5 miles per gallon higher than the trade-in vehicle.
Bad Credit Car Loans
There is one big drawback to the bill if you have bad credit: it only covers new cars. This means that, for the most part, bad credit customers will be limited to small to mid-sized cars. It also means that the current vehicle you are driving must have a combined fuel economy of 18 mpg or less, so if you are currently driving a clunker that gets better than 18 mpg, you’re out of luck.
The flip side, however, is that if you are driving an old Chevy Blazer or Ford Explorer that you’ve owned for at least a year, now would be an excellent time (once the bill is signed into law) to consider buying a new, fuel-efficient car. Since the bill has yet to be signed into law, there is still no way to determine how subprime lenders will treat the voucher in respect to their minimum down payment requirements. As this information becomes available, we will pass it on.
Tags: auto loan
Many cars that are donated to charity will be eligible for voucher under the cash for clunkers program. Since the tax deduction for a car donation is only $500 or what the car sells for, charities won’t be able to compete and therefore will lose million of dollars. A better idea is to just go back to allowing the donor to claim the book value for their car donation. This way all vehicles are eligible, the government doesn’t have to spend $4 million on vouchers and administer a program with rules which are not enforceable! Since many of the cars that are donated are recycled there is an environmental benefit as well!
Bad credit. That just don’t seem fair those of us who do have bad credit and clunkers can’t get a car so we are set to deal with the clunker and not get a new car. We can’t even get a good used car so how is that fair for us. I went to the dealer and my wife and I combined make 5000.00 a month and have bad credit. So we don’t qualify for a new car. So we goto a buy here pay here lot and get screwed cause of the banks who got a bailout don’t wanna lend any money cause of bad credit. Wait wouldn’t there credit be bad if they took the bailout? Ok so now we can’t get a new or used car and we are stuck with a crappy car. This program suck for people with bad credit. Even with just me and my car they want me to put 1500.00 more down on top of the 7000.00 the government was giving.Really??? More money and wouldn’t you know 8500.00 still aint enough. That’s it I’m done. My clunker will stay on the road wether they like it or not.
this cash for clunkers is bullshit, and carter you are right, people with bad credit, gets treated differently. It’s not fair at all!!!!!