Login
...

Cash for your clunker? $1 billion program aims to boost sales of fuel-efficient vehicles


Cox Newspapers
Friday, June 26, 2009

WEST PALM BEACH, Fla. — Gas-guzzlers routinely fill the bays at Dave Brownstein's auto shop.

Hulking Chevys. Ford vans and pickups.

Rarely does Brownstein work on a car that gets better than 18 miles per gallon — which is why he's worried about what a new "cash for clunkers" law might do to his 37-year-old shop.

"It certainly would have an adverse effect on us," said Brownstein, owner of Frank's Guaranteed A/C and Auto Repair in West Palm Beach.

And business is already down 50 percent since the economy went tumbling, he said.

The measure awaiting the president's signature doesn't look promising for repair shops — but a consumer who owns a gas-guzzler that gets 18 miles to the gallon or less could get free money courtesy of the federal government.

Car owners will get a voucher worth $3,500 if they trade in a vehicle getting 18 mpg or less for one getting at least 22 mpg. The value of the voucher grows to $4,500 if the mileage of the new car is 10 mpg higher than the old vehicle.

Owners of sport utility vehicles, pickup trucks or minivans that get 18 mpg or less could receive a voucher for $3,500 if their new vehicle is at least 2 mpg more efficient. The voucher increases to $4,500 if the fuel efficiency of the new vehicle is at least 5 mpg higher than the older vehicle.

The goal: To boost new auto sales by letting drivers who've been sitting on the fence trade in their gas-gobbling cars and trucks for vouchers toward more fuel-efficient wheels.

But Port St. Lucie, Fla., resident David Graham doesn't expect to trade in his 2002 Chevy Tahoe anytime soon.

Though the SUV gets between 16 and 18 mpg, it's paid off — and Graham doesn't want to finance a new ride in this economy.

His employer, Martin County, recently imposed one-day-a-month furloughs to cut costs.

"That's 12 days of pay a year that I don't get," said Graham, who is director of administration for the county.

Still, new-car dealers are hopeful about the measure.

"It's a lot of money, and it's exciting," said Bill Wallace, owner of Stuart, Fla.-based Wallace Automotive Group, which sells brands including Nissan, Cadillac, Volvo, Mazda and, until his Fort Pierce dealership was forced to close earlier this month, Chrysler.

A similar program in Germany has given auto sales a big boost, he said.

The impact won't be solely on domestic cars. In the case of Wallace's dealerships, mostly imported cars would qualify for the discounts because they get better gas mileage, he said.

Auto dealers around the country are behind the legislation.

"It will help dealers out," said Bailey Wood, spokesman for the Washington, D.C.-based National Automobile Dealers Association, which endorsed the bill. "Dealers are one of the largest private employers in the country and, unfortunately, many have had to lay people off. This could provide some jobs down the road for them."

And it may provide a boost for local and state governments, he said.

"You get an economic benefit for towns and cities and states that rely on sales tax revenues," Wood said.

It also will get some of the worst polluters off the roads. The bill requires dealers to ensure that the older vehicles are crushed or shredded.

Only owners of vehicles built in 1984 or later would qualify for the vouchers.

And don't think about hitting that junkyard for a sweet deal. The vehicles must be continuously insured and registered to the same owner for at least one year immediately prior to trade-in.

The new vehicle must have a manufacturer's suggested retail price of less than $45,000.

Since consumers can't get a trade-in payment in addition to the voucher, the deal doesn't make financial sense for people whose cars have a trade-in value greater than $3,500 or $4,500.

The U.S. House approved the cash for clunkers bill in June on a vote of 298-119, and Senate Democrats attached it to a war-spending bill approved last week.

The $1 billion program is authorized from July through November. It is expected to be implemented by early August.

The legislation is awaiting President Obama's signature. He supports it.

Opponents of the bill argued that it fails to include incentives to buy used vehicles and represents an artificial boost for the industry.

"It's defying the laws of economics and saying we can manufacture enough of a demand to keep the auto industry afloat," said Rep. Jeff Flake, R-Ariz.

Brownstein, the auto shop owner, thinks he has a better idea for lawmakers looking to revive the domestic auto business.

"Give each household a check for $20,000 and tell them they've got to buy a U.S. car," Brownstein said. "That, I think, would be more a solution than giving bailouts."

The Associated Press contributed to this story. Eve Samples writes for The Palm Beach Post. E-mail: eve(underscore)samples(at)pbpost.com.

© Cox Newspapers | COXnet, based in Atlanta, Ga., manages the Cox Newspapers' Wide Area Network,
and provides content, information and support to the company's 17 daily
newspapers and 28 non-daily newspapers. COXnet also manages Cox News Service.