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The Cash for Clunkers Program

This article was written by in Consumer. 12 comments.


Editor’s note: The program which was once suspended is still available through Labor Day, 2009.

Yesterday the U.S. Senate passed a War funding appropriations bill that paradoxically included a piece of legislation popularly referred to as the “Cash for Clunkers” program.

In an earlier article where Flexo pointed out the weirdness of including “guns in national parks” legislation in a law about regulating the credit card industry, reader TJJ added a comment alerting us to the “Clunkers” program being inserted into the War funding bill. TJJ was right, and so here we are. Lawmakers attach irrelevant legislation as part of larger, more popular legislation.

So that’s the first thing that doesn’t thrill me about the Clunkers program. The second is the name. A “clunker” is a car that doesn’t work anymore. Yet, this program only applies to used cars that are still in drivable condition.

An actual clunker

Image of an actual clunker courtesy of Mike McCaffrey

More importantly, I think it offers too much for too little. There’s a $3,500 credit for trade-ins that improve your mileage by 4 MPG, and $4,500 for a 10 MPG upgrade.

I would’ve liked to see a program that required the new car to get at least 30 MPG, a number high enough to actually make some kind of impact on our dependence on foreign oil. Maybe I’m too accustomed to getting 45 MPG, but I view mileage over 30 as easily achievable with any kind of car, and it seems ridiculous to entice someone upgrading from, say, 14 MPG to 24 MPG.

So, much like the new energy efficiency tax credits, I think this is a case where if you were already considering trading in your car for something that requires fewer trips to the gas station, there’s never been a better time.

I’ve said it before, but here it is again: even if you don’t agree with a new law, if it makes sense for you to save some money under it, you might as well take advantage of it.

How the ‘cash-for-clunker’ plan would work,James R. Healey, USA TODAY, June 10, 2009

Updated August 7, 2009 and originally published June 19, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by .

{ 12 comments… read them below or add one }

avatar Olivia @Independent Beginnings

The problem I have with requiring at least 30 mpg is that many used cars that are affordable have less than 30 mp3. Maybe someone wants to trade in their old pick-up truck that gets 6 mpg for a used car that gets 26. To me, that seems like a great trade that should be rewarded. A lot of people do not have the money to buy the brand-new over 30 mpg cars (or used but still expensive ones). Because of that, I am glad they only put the amount your car has to increase by instead of the minimum it needs to be (of course, your car your are trading in has to get below 18 mpg to qualify).

I also think that attaching the act to the war bill is ridiculous. I hate how the government will sneak things into more popular bills.

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avatar Apex

All the details of this plan are exactly the same as i saw proposed 1 week ago and in that proposal you only qualify if you buy a new car. This is supposed to be an incentive program for the automakers wrapped in a green ribbon. So your argument about used car mpg turns out to be moot because buying a used car doesn’t qualify.

In addition the law requires the old car to be demolished even if its in perfectly fine working condition. The reason is to get poorer mileage cars off the road. However the environmental impacts of building a new car to replace the used car prior to the used car running its useful life are debateable. The pollution and emmisions of the factory and production system are far from minimal.

In most ways this is likely another example of doing something that might sound good on the surface but when you look under the hood, the tradeoffs probably don’t make this bill amount to any net environmental improvement. There are tradeoffs to everything and building a new car has lots of affects on the environment.

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avatar Ogre_Kev

If increase mileage efficiency is the goal, I don’t see why you _wouldn’t_ want to entice someone to move from 14mpg to 24mpg. That’s better than 60% improvement. Getting someone from 25mpg to 35mpg might have a better wow-factor when looking at the new-and-improved number, but really you’ve only improved that person’s efficiency by 40%.

Your argument that there should be a floor on the to-be mileage fails to account for the fact that not all people need their vehicles for the same purpose. Some people only drive a large vehicle for the image; other people drive large vehicles because they need to haul around lots of passengers and/or cargo.

Moving the soccer mom from an old Suburban to a new more efficient minivan presents a tremendous emissions-savings opportunity even if the minivan doesn’t get hybrid-quality mileage. And even if the person is still hung up on the image, getting them out of their Hummer and into a touring sedan is a notable accomplishment.

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avatar KC

MPG is often wrong anyway. When I bought my car (01 Acura TL) it said 22-26 mpg. I never get less than 31 mpg on the highway (even when I go 100 miles or more averaging 80 mph). And I can’t get better that 20 MPG in the city unless I get out and push my car up the hill. I’ll keep this car cause it’s paid for and because it gets great mileage on the highway. For the size and safety of this vehicle it is an excellent bargain. But owning this car has really shown me how much of a misnomer MPG can be advertised on a car.

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avatar Luke Landes ♦127,485 (Platinum)

The EPA mpg estimates don’t translate to real-world, actual mpg, but they provide a basis for comparison between brands and models.

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avatar *flash*

My clunker gets 40 mpg now, so this program seems quite useless. A few clunkers had smaller size, useless luxuries extra smog equipment not yet built in, no passenger air bags and no bracing added for imaginary passengers, no power this or that; but mine is one. Those useful clunkers will be left out of any benefits. Getting a 35 mpg vehicle would be reverse math.

A 60 mpg vehicle is available, but I doubt people would smile at a 40 mpg trade-in. Doesn’t make too much sense.

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avatar Mike

I bought a new Honda Fit in 2007 and have tracked my mileage every tank. It was rated (old EPA estimates) at 31/37 but my average for over 2 years has only been 24 mpg (mostly urban driving). However, on a recent 300+ mile (nearly) all-highway trip, I got 36 mpg. 30 mpg is still a very high number to achieve.

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avatar Oldcheme

Wise up Smithee, there aren’t any non compact gasoline cars that get 30 combined in the new EPA ratings. Even the 4 cyl camry and malibu only get 25 and 26 respectively. So the list is reduced to Yaris, Corolla, Cobalt, Aveo etc. Not a family car in the bunch. You would have to go to a hydrid or diesel to get 30 in a mid size.

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avatar Steve

This is just another way to funnel taxpayer dollars directly into the pockets of the auto industry. If we need to get more fuel efficient cars on the road, we increase the gas tax and let nature take its course. Actually that would have another benefit as well – in addition to getting more fuel efficient cars, people would also drive less, the other side of the reduced fossil fuels coin.

I would love to take advantage of this, but my wife seems to have a sentimental attachment to our existing truck. I wonder if we can buy a barely running clunker off someone and immediately trade it in?

+1 to “14 to 24 is a 60% improvement”. On the other hand, $4500 is only 28% more than $3500, and all you need to do to get that is upgrade by 4 MPG.

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avatar Olivia @Independent Beginnings

I didn’t realize that only brand new cars counted in this act when I first commented. That completely ruins the act for me. I do not see the value in buying a brand new car just to watch the value depreciate dramatically in the first year.

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avatar Jim

I know its just an example photo BUT…. The so called “clunker” in the photo is a circa 1964-1966 Plymouth Barracuda. The body looks straight, its parked on the street and has shiny hubcaps so its probably in driving order so it may just need a paint job. Even in that condition that car is probably worth around $4,000 to $5,000 or more as a collectible. You’d be better off selling it to a collector than trading it in for a new car.

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avatar Pat

The cars can’t be over 25 years old. This ~ 1965 Barracuda (I owned one) is a bit old and it would get over 18 mpg when tuned up. They didn’t have large engines.

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