By Richard Schneider
Emeritus Professor of Accounting
Winona State University
The ‘Cash for Clunkers’ provisions are part of Supplement Appropriations Act of 2009, H. R. 2346, passed by the Senate June 18th, and on to the President for signature. This bill is aimed at removing some of the less fuel efficient vehicles from road, and stimulating the sale of new fuel efficient vehicles. Buyers with qualified trade-ins will receive the benefit of either a $3,500 or $4,500 voucher toward the purchase of the vehicle. There are also provisions for trucks.
For the autos, there are several restrictions which allow only current owners of these less fuel efficient autos to qualify, so you can’t buy Grandpa’s old junk car for $1, trade it in on a new one, and get the voucher.
1. The trade-in must be drivable.
2. The trade-in is less than 25 years old.
3. The trade-in was owned by the new car buyer for at least the last 12 months.
4. The trade-in was continuously insured and registered for the last 12 months.
5. The trade-in has a CFE (combined fuel efficiency) of 18 mpg or less.
6. The trade-in is scraped by the dealership.
7. The new auto is new; a demo unit should work if it has not been titled yet.
8. The new auto has a CFE of 22 mpg or higher.
9. The new auto must be purchased between July 1, 2009 and November 1, 2009.
10. $3,500 vouchers for an increase in CFE of 4 to less than 10 mpg.
11. $4,500 vouchers for an increase in CFE of 10 or more mpg.
12. Vouchers are sent to the dealership, not the buyer, and treated as a reduction in price. As you see not everyone buying a new car with an old trade-in will get the voucher price reduction. The objective of the law is to replace the less fuel efficient autos and trucks currently on the road, with new better fuel efficiency vehicles. It appears this will not only be good for reduction in exhaust emissions, but also a stimulant for auto sales.
With the new car purchased, not only is there the offer of the voucher price reduction, but also if the auto is one of the targeted ones for alternative fuels, you will be eligible for that credit.