A US scrappage incentive known as “Cash for Clunkers” has been approved by the US Senate and is likely to be implemented within the next 30 days.
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However, some analysts have given the new legislation a lukewarm reception and said that it will struggle to achieve a significant lift to sales.
The scheme, which offers vouchers of up to $4,500 on scrapped cars, now moves to the White House for the president’s signature.
Under the programme, trade-in vehicles, 1984 models or newer, must have average fuel economy of no more than 18 miles per gallon. And the new car or truck must get better gas mileage than the one that was scrapped.
The payoff grows depending on the difference in the fuel efficiencies of the old and new cars. For example, a new car getting at least 4 more miles per gallon than the old car will be eligible for a $3,500 voucher. A new car getting at least 10 more miles per gallon would get a $4,500 voucher.
Consumers will also be able to use the vouchers toward the five-year lease of a vehicle.
Vouchers will also be available for small and large light-duty trucks.
Consumers will be able to start using the vouchers as soon as the National Highway Traffic Safety Administration (NHTSA) finalises the rules – a process that must conclude within 30 days of the president’s approval.
However, Edmunds.com notes that the “Cash for Clunkers” legislation is in effect a minimum trade-in allowance and suggests that it will struggle to produce the estimated 250,000 vehicle sales gain.
It says results will be limited because most qualifying “clunkers” are at least 10 years old and their owners will not generally be able to afford a new vehicle. Also, participants will need to have owned the clunker for at least one year.
Edmunds says that allowing new vehicle buyers to purchase clunkers that would be then be traded-in and scrapped would ignite wave of economic activity and still achieve the bills environmental goals.
“Similar legislation has seen success in Europe because European new vehicle buyers keep their vehicle considerably longer than those in the US,” said Jeremy Anwyl, CEO of Edmunds.com.
“But in the end, this is a non-event. Even 250,000 new vehicles sales will not provide the impact needed for an industry looking for at least five million in additional sales.”
“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,” stated Edmunds.com Editor In Chief Karl Brauer.
Edmunds.com has compiled a list of “clunkers” whose owners would benefit from pursuing the rebate. The list can be accessed by visiting: http://www.edmunds.com/media/cashforclunkers/vehicles_under_4500.pdf
