By Staff
The Senate recently passed and President Obama signed into law a measure that will encourage people to purchase new, more fuel-efficient vehicles, stimulating the sale of new vehicles and reducing overall fuel consumption and greenhouse gas emissions.
The so-called "cash for clunkers" program would provide a credit for the purchase of new vehicles to people who turn in older, less fuel-efficient vehicles. The program will provide a much-needed boost to the struggling auto industry, including manufacturers, dealers, suppliers and other related enterprises.
New vehicle sales around the world continue to stagnate as automakers all over the world weather this serious downturn in the U.S. and global economies. Sales have decreased 30 to 40 percent over the past year. It is imperative that we turn around this sales decline.
There is strong evidence that a vehicle trade-in program will do the job. In fact, nearly every major industrialized country in the world with an auto industry now has some kind of trade-in program in place, and those countries have seen increased auto sales.
In Germany, new vehicle sales have increased 25 to 40 percent since its program was implemented earlier this year. China saw an increase in new vehicle sales of 25 percent in April after its program was implemented. Other countries – such as Japan and Korea – have more recently followed suit and implemented similar programs. While it is too early to obtain sales data for these countries, they are expected to show similar increases in new vehicle sales.
Here's how the program works: an individual brings an older and less fuel-efficient vehicle to a dealership when looking to purchase a new car. In lieu of receiving the trade-in value from the dealer, the consumer will receive a credit of $3,500 to $4,500 toward the purchase of the new vehicle. After the sale is finalized, the dealership will then obtain a voucher from the federal government and the vehicle will go to a disposal facility.
To be eligible for the credit, the old vehicle must have been registered and insured continuously for one full year prior to trade-in, and must have a fuel economy rating of 18 mpg or less as determined on www.fueleconomy.gov <http://www.fueleconomy.gov> , or in the case of a work truck, be older than a 2002 model.
The new vehicle must have a fuel economy rating of 22 mpg or greater for new passenger cars, 18 mpg or greater for new light duty trucks, and 15 mpg or greater for new large trucks. To receive a credit, the new vehicle must have a higher fuel economy rating than the old vehicle.
The amount of the credit would depend upon the incremental improvement in fuel economy of the new vehicle over the old vehicle. For eligible purchases, a credit of no less than $3,500 would be available, and the credit could be as much as $4,500 based upon the fuel economy of the new vehicle. Higher fuel economy, therefore, would bring higher savings – thereby creating a positive incentive for individuals to buy more fuel-efficient vehicles.
The National Highway Traffic Safety Administration, which is administering the program, will be releasing detailed regulations soon on how the program will work and be administered. More information is available at www.cars.gov <http://www.cars.gov> .
To ensure that the older less fuel-efficient vehicles are not used on the road again, the old vehicle will be taken to a registered disposal facility where it will be dismantled by removing the drive train and engine block. Other used car parts could be sold separately by the disposal facility.
This program is expected to drive up to one million new vehicle sales. Those vehicles will be more fuel-efficient than the clunkers they replace, and they'll help sustain jobs at automakers and dealerships alike. It's an important measure to help automakers get back on track and to help improve Michigan's economy.