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The Cash for Clunkers will be suspended as of midnight tonight. With the considerable backlog of processing car deals, it is feared the$1 billion put aside for the program is accounted for.
One of the most direct incentives to come out of the federal government’s recent economic stimulus package is the Car Allowance Rebate System. Also known as CARS, or “Cash For Clunkers,” the program is designed to do two things: lower the impact that automobiles have on the environment in the United States, and encourage consumers to buy new cars. With $96 million of the $1 billion in rebates already accounted for, The Transportation Department has called for a suspension of the program as of this evening at midnight.
Touted as a “green” program, CARS is meant to remove so-called “gas guzzling” vehicles from the road and replace them with brand new, fuel efficient automobiles. Anyone who trades in a vehicle which gets 18 miles per gallon or less in order to purchase a car that gets 22 miles per gallon or more qualifies for a voucher from the government good towards the total price of the new automobile. If the fuel mileage over the trade-in improves by 4 miles per gallon, then the value of the voucher is set at $3,500, but if the improvement matches or exceeds 10 miles per gallon then the incentive jumps to $4,500.
For those trading in trucks, the qualifying fuel mileage is slightly different. Light compact trucks only need to demonstrate a 2 mile per gallon increase when comparing the new truck to the old to qualify for the minimum $3,500 voucher, while large trucks get $3,500 for trading up to a vehicle which gets 1 mile per gallon more than the minimum of 15 miles per gallon and $4,500 for getting behind the wheel of a truck that gets 17 miles per gallon.
Of course, there are also other restrictions and qualifications that must be met in order to take advantage of the CARS program. All vehicles being traded must be no older than 25 years. Applicants must also be able to prove that they have owned the vehicles in question for at least one year, with continuous insurance and registration during that period. That means you won't be able to go down to the local scrap yard, pick up a clunker and then trade it in. The program is also only valid until November 1st of 2009, which means there are only a few months left to cash in on the bonus cash. Well, that was before the announcement of the programs suspension yesterday.
It seems no one really expected the surge in car sales, even with the help of a rebate. With over 22,000 vehicles purchased through the program in the early weeks, and already a huge backlog of processing the rebates, the $1 billion is just about gone. With a backlog in the processing of the deals, car dealerships are wondering if the total car sales to be covered by the rebate hasn't already exceeded the $1 billion. There are many Some Congressional members, as well as car makers, hope the government will find a way to add more money to the program, rather than suspend it completely. Auto sales were down 35% from last years figures, the worst numbers for auto sales in 25 years.
What happens to the cars that have been exchanged for newer, more economical models? Unfortunately for hobbyists, they are scheduled to be crushed in an effort to remove their carbon emissions from the highway ecosystem forever. While this might seem like a grim end to possibly classic automobiles, some feel that it is a small price to pay to clean up America’s roads and encourage a new mind set when it comes to vehicle purchases.
The American public will just have to wait and see what the government decides to do, suspend the program permanently or find more money to bankroll it's continuation. There aren't any quick answers, and right now it seems, we don't have any.