The official name for the US ‘cash for clunkers’ program, as the media has taken to calling it, is the “Car Allowance Rebate System” or CARS.  Set up by Congress in mid-June 2009 with $1 billion in funding to help struggling automakers through their worst sales slump in more than 25 years—(down 35 per cent from the same period in 2008) and to save fuel and reduce air pollution —(an oft-cited statistic is that vehicles built before 1995 pollute 19 times more than 2004 and newer models), it quickly ran out of money.  Hence the need for the top-up.

 

Under CARS, the US National Highway Transportation Safety Authority (NHSTA) has set up a cash rebate system under which registered owners with clear titles to drivable clunkers not more than 25 years old and getting 18 mpg or less qualify for a CARS credit of up to $4500 determined by the mileage of the new vehicle they choose to purchase.

 

The new vehicle cannot cost more than $45,000 and must be purchased between July 1, 2009 and November 1, 2009 or sooner if the funding runs out before this date. (Secretary LaHood has been quoted as saying he believes the $2 billion infusion could extend the program to Labour Day).  Any new car foreign or domestic qualifies, the reports thus far saying that 80 percent of the new cars purchased under the program are foreign made.

 

Motorcycles do not qualify and the rules for trucks differ somewhat.  More than 80 percent of the ‘clunkers’ turned in so far have been trucks.  The CARS credit acts like a cash down payment and is not linked to any credit approval process, which remains a matter between the purchaser and the new car dealer.

 

European consumers have enjoyed a clunkers program since late 2008, so much so that ending it is proving to be politically difficult.  In Germany, owners of cars at least nine years old get about $4,000 for turning in their clunkers and buying a new car, regardless of its size or fuel efficiency.  Critics say this no-strings-attached approach is costing taxpayers a fortune and fails to help the environment.

 

Germany initially expected to spend 1.5 billion euros for 600,000 clunkers but has increased the budget to 5.0 billion euros for two million and extended the deadline through 2009.  In the UK, since April 2009, owners who scrap a vehicle that is at least 10 years old receive about $3,600 jointly funded by the government and the car companies.

 

The next Road Rules will look at the Canadian and British Columbian approach to clunkers.