Money Matters, Simplified.
Auto industry may change gears with the cash for clunkers program
by Jamie Anderson - July 25, 2009 - comments
The aim of the cash for clunkers program of the U.S government is to boost the sagging auto industry and remove the auto guzzlers from the roads at the same time
Washington, July 25: The Car Allowance Rebate System program, under which the U.S government intends to run the cash for clunkers program, was signed into a law in the June of 2009. However, the details of the program were not divulged till about a couple of days back.
Now that the cat is out of the bag, both customers as well as dealers of cars are overjoyed. The auto dealers envisage a 10 to 30 percent increase in new vehicle sales at least till the program runs. On the other hand, the prospective car shoppers can take advantage of new government incentives worth $3,500 to $4,500.
The cash for clunkers program
Brainchild of the U.S administration, the Car Allowance Rebate System program is being launched with a budget of $1 billion. The program runs through Nov. 1 or till the budget is exhausted, whichever is earlier.
Under the said program, consumers will get a rebate off the selling price if they swap their older-model gas-guzzler with a newer, more fuel-efficient car.
The old vehicle to be traded in, needs to fulfill the following criterion: cars and trucks must be 1984 models or newer, they must get 18 miles per gallon or less and the vehicle needs to be drivable, insured and licensed for at least a year.
The used car purchases will not attract any rebate under the program. The vehicle may be a domestic or foreign model, but needs to meet the fuel-efficiency requirements. Only those vehicles that have a retail price of less than $45,000 would be sold under the program.
The rationale
The automobile industry in the United States has been reeling under the unrelenting recessionary forces. Two of the Detroit’s automakers have gone under bankruptcy. The sales have plummeted as the threat of unemployment looms large on the heads of the customers.
Essentially there are no takers for new vehicles. The cash for clunkers program is to bring in additional sales of 250,000 new cars nationwide.
Ken Chester Jr., president of Motor News Media Corp. of West Des Moines, said of what the program could trigger, "I think for people who have a better outlook on whether they're going to have a job in six months, this may be a tipping point."
For people who have been through several rounds of layoffs or business cutbacks, I think they're going to sit tight," he added.
The program has been so designed that people who normally shop for used vehicles qualify for it. The administration is killing two birds with one stone. One of course is to pep up the sagging economy. The other is to get rid of lousy mileage vehicles.
Critics of the rebate plan aver that the program will have a limited impact on America's struggling auto industry as the people who will qualify are the ones who will have problems affording new-car payments, even with the financial support.