House Passes "Cash For Clunkers" Bill

In Effort To Jump Start New Car Sales, Bill Offers Consumers Rebates For Trading In Gas Guzzlers For Fuel Efficient Vehicles

(AP)  The House on Tuesday approved a "cash for clunkers" bill that aims to boost new auto sales by allowing consumers to turn in their gas-guzzling cars and trucks for vouchers worth up to $4,500 toward more fuel-efficient vehicles.

President Barack Obama has encouraged Congress to approve consumer incentives for new car purchases as part of the government's work to restructure General Motors and Chrysler. The House approved the bill 298-119.

Supporters pushed for the measure to stimulate car sales and increase the fleet of fuel-efficient vehicles on the nation's highways. The auto industry has sought the incentives after months of poor auto sales. In May, overall sales were 34 percent lower than a year ago.

"Stimulating sales is the only way to get the auto industry back on its feet," said Rep. Donald Manzullo, R-Ill.

General Motors Corp. and Chrysler LLC have received billions of dollars in government aid and the entire auto industry has watched car sales plummet during the past year. In May, overall sales were 34 percent lower than a year ago.

"Our industry has been stuck in neutral and really has not started to move," said Larry Kull, president of Marlton, N.J.-based Burns Kull Automotive Group, which includes General Motors, Honda and Toyota dealerships.

The vehicle scrappage bill has been under negotiations for months as lawmakers try to find a solution that boosts car sales while providing some environmental benefits. Proponents have pointed to similar programs in Europe that have enhanced auto sales.

Opponents said the bill failed to include incentives for used vehicles and represented an artificial incentive for the industry.

"It's defying the laws of economics and saying we can manufacture enough of a demand to keep the auto industry afloat," said Rep. Jeff Flake, R-Ariz.

Separately, House and Senate appropriators were discussing providing $1 billion to a supplemental war funding bill for the "cash for clunkers" program, which aims to generate about 1 million new auto sales. Since the yearlong vehicle program is expected to cost $4 billion, lawmakers would attempt to find the additional money later this year.

Under the House bill, car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 miles per gallon. The value of the voucher would grow to $4,500 if the mileage of the new car is 10 mpg higher than the old vehicle. The miles per gallon figures are listed on the window sticker.

Owners of sport utility vehicles, pickup trucks or minivans that get 18 mpg or less could receive a voucher for $3,500 if their new truck or SUV is at least 2 mpg higher than their old vehicle. The voucher would increase to $4,500 if the mileage of the new truck or SUV is at least 5 mpg higher than the older vehicle. Consumers could also receive vouchers for leased vehicles.

Rep. Betty Sutton, D-Ohio, the bill's chief sponsor, said the bill showed that "the multiple goals of helping consumers purchase more fuel efficient vehicles, improving our environment and boosting auto sales can be achieved." Sen. Debbie Stabenow, D-Mich., has backed a similar version in the Senate, which has the support of automakers and their unions.

The bill would direct dealers to ensure that the older vehicles are crushed or shredded to get the clunkers off the road. It was intended to help replace older vehicles - built in model year 1984 or later - and would not make financial sense for consumers owning an older car with a trade-in value greater than $3,500 or $4,500.

The U.S. industry is expected to generate about 9.5 million vehicles sales in 2009, compared to more than 13 million in 2008 and more than 16 million in 2007.

Auto analysts questioned whether it would be enough of an incentive for many consumers burdened by debt or financially stressed by the troubled economy.

"That is the major sticking point for Americans: How do you finance your vehicle? How do you pay for it?" said Rebecca Lindland, an auto industry analyst for the consulting firm IHS Global Insight.

A group of senators led by California Democrat Dianne Feinstein were pushing an alternative version that would require consumers to trade up for more fuel-efficient cars and trucks to qualify. They complained that even a 2009 Hummer H3T, which gets 14 mpg in city driving and 18 mpg on the highway, could qualify for the incentives under the House bill.

Under Feinstein's plan, a passenger car owner's trade-in would need to get 17 mpg or less to qualify and only new passenger cars getting at least 24 mpg would be eligible. Owners could receive a $2,500 voucher for a new car that gets at least 7 mpg more than their old car. The voucher would increase to $3,500 for new cars with a 10 mpg improvement and $4,500 for new cars with a 13 mpg increase in fuel efficiency.

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To learn more about whether your vehicle would qualify under the bill's current terms, and for how much, click here.

[petals109]

Why does it only apply to new cars? How about a used car from a dealership with the same specs? Not everyone can afford a new car in this economy. If you can, then you don't really need this deal. My daughter needs a car. The car needs work which she cannot afford. Even with government deal, it is out of the question. Used cars by a dealership should have been in the bill. Or vouches for all cars traded in for more fuel efficient car. No one's REALLY listening!

[jaxllc]

I don?t qualify because my car already gets good gas mileage. My dad swears by the car buying process here: http://excarsalesman.typepad.com/. It is kind of similar.

I haven?t tried it yet, but I might because it looks good.

I have a feeling dealers are going to automatically increase prices because of the increased demand (artificial) for lower MPG cars. So the thousands of savings from this bill for consumers is not entirely accurate. The demand will increase prices and you?ll get a voucher from increased prices. I?m certain some markets you?ll come out even as if they never offered this voucher. It is poorly written legislation.

[my5200-2009]

Sounds like a good idea to me. I am a loyal American and I hope I can help my country.
I will trade in my old GMC for a new fuel efficient GMC under this plan. No problem.

[illinibrown]

I'd love to see CBS News to a real study on the outcome of such a bill. Take a real clunker to several dealerships prior to the bill being signed into law and see exactly what kinda deal they can negotiate. Then do the same thing after the law goes into affect. See exactly what benefits the consumer realizes. I would suggest the real winners are the car dealerships and auto industry, not the individual consumer.

These rebates get factored into every equation by dealers. With the increased consumer demand they will create, car dealers will take as much of the $3500-4500 for themselves as they possibly can. I ONLY WISH SOMEBODY (INVESTIGATIVE NEWS AGENCY, ETC.) WOULD DO A REAL MARKET TEST ON THIS!!!

[u-r-right]

I get 17-20 MPG in my diesel pickup. Not bad as far as I am concerned. I'd get more if I could legally take off the extra particulate filtration the EPA has mandated for all diesels by 2010.

This plan is another crappy bandage on a failed economy. I highly doubt every eligible person will rush out and buy a new car. They are still overpriced and many people are still out of work. How can they afford to buy a new car? Even if everybody would go out and buy a new car, what happens then? There will be no people left in need of a new car and the car industry would eventually tank once again.

[cdegolier]

Wouldn't it just be cheaper for Obama to give all WORKING AMERICANS $1 million each?

[zippiez]

Oh goody. Replace a gas guzzling SUV with another gas guzzling SUV.
Nothing like rewarding the gas guzzling public for buying those ridiculously obscene missiles heading down the highway.

Oh, maybe it has nothing to do with saving the auto industry, helping people, or encouraging the economy. Maybe this is all about Congress insuring it can buy cars cheaply! No-o-o-o, Congress would never think of itself before its constituents. Would it???

[endurorob]

Well good. More tax payers money to bail out the auto industry. And this one helps bailout not only American companies but all other car makers. But then again in these times of restricted income anyone with a car that would be elidgeable for this would probably be a little foolish to trade in a paid off car and get one with a $300 month payment when the new car only saves them maybe $50 a month in gas. Then you need to factor in the higher registraton costs fro a new vehicle and the higher insurance costs.

[iam4honesty]

Squawk... Squawk... Squawk... all you right wingnuts know how to do is bit ch. You're against anything that is good for the country or it's citizens. You people are traitors.

[cdegolier]

Another giant waste of money.