The City Wire report: Consumer info on the proposed ‘Cash for Clunkers’ bill

The latest attempt by Congress and the federal government to socially engineer the marketplace is the “Cash for Clunkers” bill that would offer a tax credit up to $4,500 to trade in a gas guzzler for a more fuel efficient car.

The bill — Consumer Assistance to Recycle and Save and Act (CARS) H.R. 2751 — passed the House of Representatives on Tuesday and is headed to the U.S. Senate.

“If you can get more than $4,500 for your vehicle, you’re better off selling it or trading it in without taking advantage of the Cash for Clunkers rebate,” Edmunds.com Editor In Chief Karl Brauer, said in this statement.

Key aspects of the bill include:
• The trade-in vehicle must be crushed;
• Vehicles eligible to be crushed must have an EPA combined fuel economy rating of 18 miles per gallon or less, and the new vehicle must have a better mileage rate; and
• Eligible car owners must have owned the car to for more than one year.

CLUNKER CONCERNS
Edmunds.com, known as market-based, objective watchers of the auto sector, say the proposed bill has problems. (Link here for the Edmunds.com report on the legislation.)

“This legislation attempts to offer a benefit for the environment and to spur vehicle sales, but the reality is that it does neither very well,” according to Edmunds.com CEO Jeremy Anwyl. “In terms of vehicle sales, the only consumers who will be interested are those willing to take no more than $4,500 for their current car and yet be financially able to buy a new one – quite a narrow profile.”

Anwyl advises legislators delete the one-year ownership requirement, and eliminate the scrapping requirement.

“If owners of newer, less fuel efficient vehicles could get above a fair value for their trade-ins rather than just the government allowance, more people would likely participate and car sales might truly be reignited,” Anwyl said.

Edmunds.com also says the environmental benefits of the program are not expected to be significant.

(Edmunds offers this list of cars likely to be eligible under the House provisions of the clunker bill.)

CLUNKER PROS AND CONS
American Progress, a supporter of the law, believes the program “would translate into dramatic reductions in both greenhouse gases and in the more acute air quality pollutants from older vehicles, such as ozone, particulates, and nitrogen oxides, all of which pose serious threats to public health in high-traffic urban areas.”

The organization also sees the bill as an economic development stimulus, saying the “program has the potential to take millions of the oldest, most inefficient vehicles off the road and shift the entire market toward newer, more economical models, increasing demand and creating jobs.”

Bill Chameides, a dean at Duke University, offers a pro and con perspective on the clunker legislation. He notes one particular problem for those hoping the bill will significantly reduce greenhouse emissions.

“Scrapping an old car for a new one doesn’t guarantee a lower carbon footprint even if the new car gets better fuel economy. The reason: manufacturing and delivering the new car consumes energy, and producing that energy involves greenhouse gas emissions. The amount of carbon dioxide (CO2) emitted to produce a new car has been estimated to range from about 3.5 to 12.5 tons, or an average of about 6.7 tons,” Chameides explained in this report.