Clunker Program Hopes to Pivot Americans Out of Recession By Pat Munro At Isnare.com Ezine Articles

The cash for cars program, known as CARS (Car Allowance Rebate System) in the United States has been an immense success in stimulating the automotive industry’s sales this last quarter. It has exceeded most everyone’s expectations. Throughout history, auto sales have been the instigator to pull Americans out of a recession. This is due to the buying power of consumers, who may not buy a new house, but they will purchase a new car. The ultimate outcome law makers are hoping for are the sale of over 700,000 new cars and light trucks. The impact of this goal will contribute substantially to tax revenues from each sale going to the states and cities income. As well, income taxes will be generated from the commissions and salaries the dealership personnel might not have earned. The program incentives, to date, have generated more than 435,000 vehicle sales. It should be said that nearly half of new vehicles purchased under the program are from the Big Three automakers.

The Obama government increased the original funding by two billion dollars, hoping to generate the sale of 500,000 more vehicles. The data the government is generating shows that new vehicles purchased under the program were 61% more efficient than the trade-ins. According to Transportation Secretary Ray LaHood, Energy Secretary Steven Chu and Environmental Protection Agency Administrator Lisa P. Jackson, the fuel economy of the newly purchased vehicles is said to be 25.4 mpg, and the average fuel economy from the trade-ins is 15.8 mpg. Stating that, with this improvement, the purchaser will save approximately $700 to $1000 per year in fuel costs. In addition to the money saved on gas, people will have safer cars, lower repair costs and dramatically reduce pollution emissions. With this program, new consumers can trade in vehicles less than 25 years old for a 3500 or $4500 rebate. This amount is not taxable to the purchaser. The 25 year limit is to save potentially collectable cars from destruction. In order to receive the rebate, a car must achieve 22 mpg + 4 mpg for $3500 rebate and cars + 10 mpg will receive $4500. The vehicles must have been registered and insured continuously for 12 months prior to the trade-in. Because of these restrictions to the trade-in time limit and the destruction of reusable cars and parts, some critics are arguing that the harm caused by destroying the old vehicles may outweigh the benefits of exchanging gas guzzlers for fuel efficiency. According to the Automobile Recyclers Union, recycling auto parts saves 85 million gallons of oil per year in energy savings. Alternately, other countries around the world are trying to stimulate their economies with similar cash-for-clunkers programs, without restrictions. For example, Germany offers 2,500 euros (about $3500 American) for any car older than nine years. Britain, France and Spain have programs open to cars older than 10 years; in Japan they pay 250,000 yen (about $2600 American) for cars older than 13 years. Mexico gives 15,000 pesos ($1,100 American) for cars they turn over to recycling depots or junkyards, they can then apply that to cars worth up to 160,000 pesos ($11,760 American). Eligible vehicles are ones built in Mexico, or imported from any of the seven companies with assembly plants in the country.

What does this all amount to? Well, we will have to wait and see what happens over the next few months in America and around the world. This will undoubtedly be the gauge on which supporters and critics alike will base their theories.

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