Carl F. Thelin

DO NOT ASSUME THAT EVERONE THINKS ALIKE 

The Cash-for Clunkers  (CFC) government program was [in 2009] getting a huge following on the internet with Conservative and Liberal bloggers screaming at each other.

What are the facts and reasonable assumptions? Saying nasty things about Obama or Limbaugh does not enhance the logic of anyone’s statement.

One fact: the “rebate” AKA “a gift to the auto industry” is money promised to each new car dealer who sells a qualified new car to a buyer who trades in an older vehicle qualified as a “clunker”.

Oh Oh – there’s a lot of  underlined stuff (AKA Weasel Words) there.

WW#1 - Promised. The dealer gives up a new car, scraps the trade-in, and waits how long  for the rebate? If the buyer pays cash , the dealer won’t be hurting much.

WW#2 -  Qualified new car. In typical government jargon, like that in your income tax manual, this should be simple. It is not. I’ll save the CFC details for later.

WW#3 – buyer. Is this a person who was planning to buy a new car soon? Is this a person who can make the payments on the loan for the price of the new car less $3500 or $4500, or is this the rare person who pays cash from his savings?

WW#4 – An older vehicle qualified as a clunker.  See the CFC details below. Here we find a bunch of arguments. Why ruin a car that still has plenty of useful life? It could be desirable for a young, first-time buyer, or someone who just can’t afford a new car even with the CFC rebate?

WW#5 – How long? See this Q&A from the CFC website. The dealer will obtain reimbursement. When?

Do I need to get a voucher or sign up for this program?

You do not need a voucher and you are not required to sign up or enroll in this program. Participating new car dealers will apply a credit, reducing the price you pay at the time of your purchase or lease, provided the vehicle you buy or lease and the vehicle you trade in meet[s] the program requirements. The dealer will then obtain reimbursement from the government.

We are being told in the media that clunkers are being crushed. The CFC rules say:

The CARS Act requires that the trade-in vehicle be crushed or shredded so that it will not be resold for use in the United States or elsewhere as an automobile. The entity crushing or shredding the vehicles in this manner will be allowed to sell some parts of the vehicle prior to crushing or shredding it, but these parts cannot include the engine or the drive train.

Did you notice that the entity is allowed to strip the hulk of useful parts before crushing it. The body, engine and transmission got to go!

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CFC rules (The CARS Act)

Vehicles to be turned in must have a VIN plate showing DOM of 1985 through 2001.

For a vehicle deemed to be a passenger car the qualifications are:  The EPA fuel economy of the trade in is 18 mpg or less; the rebate voucher for the dealer will be worth $3500 if the new vehicle gets at least EPA 22 mpg, or, the rebate will be $4500 if the new vehicle gets 10 mpg more than the one traded in. The CFC tells you that the EPA and the NHTSA  determine what is a passenger car.

For some other vehicle classified as a van, pickup or SUV you can first refer to a 400-word definition given by the CFC program to determine if that is what you have. Put simply, if the thing has a gross vehicle weight less than 10,000 pounds, it probably will qualify.

Here the rules are easier to understand. The voucher is worth $3500 if the new “thing” gets more than 2 mpg than the clunker, or the voucher is worth $4500 if the improvement is at least 5 mpg.