Cash for clunker cars may hit some roadblocks

BY KATIE SIMS | JULY 08, 2009 7:21 AM

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Victor Mansur, a recent UI graduate, drives a 1993 Jeep Cherokee. Under a government program to take effect at the end of the month, his vehicle could be eligible for a $4,500 rebate if he trades it in for a more fuel-efficient car.

But he — and local car dealers — have doubts whether people will trade in their clunkers in droves.
The Car Allowance Rebate System, or “Cash for Clunkers” program, will offer customers rebates of either $3,500 or $4,500 to trade in their older, less fuel-efficient cars to purchase or lease a new vehicle that gets more than 22 miles per gallon.

The goal of the program is to put more environmentally friendly, fuel-efficient vehicles on the road while increasing car sales and saving consumers gas money.

“It’s a win-win for everybody, not to mention the environment,” said Eric Bolton, a spokesman for the National Highway Traffic Safety Administration, which is working closely with manufacturers, dealers, and disposal facilities to get the program up and running.

But there’s a catch: The purchased cars must be brand-new.

“I wouldn’t do it because I would probably get more money for just trading in my car,” Mansur said.
UI junior Tor Smith, who drives a Mitsubishi truck, agreed.

“I don’t have the money to buy a new car right now,” she said.

Furthermore, there are specific requirements that eligible cars have to meet to be traded in. The vehicle must have been manufactured within 25 years of the buying/leasing date, have a combined city/highway fuel economy of 18 miles per gallon or less, and have been insured by the owner for at least one year.

Even local car dealers are uncertain about how popular the program will be. The recently signed law requires dealerships to recycle or destroy the old cars, so additional money for the trade isn’t an option.

If people can get more than the rebate amount for their car, there is little incentive to participate in the program, said Bruce Anderson, the general counsel for the Iowa Automobile Dealers Association.

A customer’s ability to receive a loan may be another roadblock, said Daryl Bulle, the general sales manager for Toyota of Iowa City. If customers needing loans can’t get approved by lenders, then they can’t take advantage of the program.

And he thinks it’s unlikely anyone else can pick up that tab.

“I guess if the government wanted to get crazy, it would guarantee those people loans,” Bulle said.

Still, he said, he has seen one customer set on trading in his car for a Toyota Prius, ranked the most fuel-efficient on the market by the U.S. Department of Energy.

“We’ve had enough people come in and ask about the program, and I think it will drive people to make decisions about this that otherwise would not,” Bulle said.

Those who want to trade in their cars must do so before Nov. 1 — when the program ends — or until the $1 billion funding runs out.

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