The House of Representatives today voted to approve the so-called “Cash for Clunkers” rebate, a program designed to replace old inefficient gas guzzlers with newer, more fuel efficient cars, and stimulate the struggling auto industry. Car owners would be given vouchers for up to $4,500 toward a new car in exchange for having their old one hauled off for scrap.
The program is an adaptation of several European laws that are expected to stimulate the purchase of 400,000 to 500,000 new vehicles in the next year. The United States government is willing to offer up to 1 million such vouchers at a cost to taxpayers of $3 billion to $4.5 billion, with the funding coming from the existing $787 billion stimulus package.
The House legislation requires that older cars getting less than 18 miles per gallon be replaced with 2004 or later model year vehicles getting at least 4 mpg more. A different version of the bill, which mandates a 25 percent increase in fuel economy between the old and new vehicles, is currently under consideration in the Senate. Senator Diane Feinstein, author of the Senate proposal, says that her bill would result in 32 percent more oil savings than the bill passed today by the House. It’s unclear which version of the legislation will ultimately make it to the President’s desk, but lawmakers seem confident that a “Cash for Clunkers” bill will be signed into law in the near future.
Those looking to cash in on the law should remember: only cars getting less than 18 mpg are eligible to be traded in, and in order to take advantage of the full $4,500 voucher, car buyers would need to increase their fuel efficiency by at least 10 mpg. The icing on the cake is that the discount can be applied in addition to any hybrid or electric car tax credits, or other deductions already in place.