As of Friday Jun 19, 2009 5:00pm, the controversial Cash for Clunkers has just passed Congress and is now heading to President Barack Obama for signature as a piece of legislation meant to help get gas guzzlers off U.S. roads and replace them with new, more efficient vehicles. Many say the act is too lenient and is merely being pushed through as a measure to help get Detroit’s unsold inventory off dealer lots.

Called the “Consumer Assistance Recycle and Save Act of 2009″, or more commonly, “Cash for Clunkers,” the $1 billion program will provide a voucher of up to $4,500 (effectively just knocking that much off the price tag — dealers will get electronic payments from the feds) to help offset the cost of new car purchases or leases over the next five months. The cars that you’re limited to must cost no more than $45,000. So that means I can’t trade in my old 1998 Dodge Caravan (MPG rating of 18) for a 2009 Lotus Elise (MPG rating of 26) because the MSRP is too high ($47,500). However, that awesome new 208HP 2009 Mini Cooper S John Cooper Works (MSRP of $29,200) would not only get me the basic $3,500, but it’s combined cycle of 28 MPG (10 more than my current car) will get me an additional $1,000 for a total of $4,500 off the price of the car! Not a bad deal, in my humble opinion. This rebate also works with other rebates from the manufacturer or hybrid car rebates offered from the Federal Government.

So what is going to happen to all these old cars now that they are off the road? Most will have their engines taken out and destroyed (to ensure these “high polution” drivetrains stay off the road). However, miscellaneous parts like doors, bumpers and other non-drivetrain parts will still be around to make sure those cars that are running can be repairs and made roadworthy.

The House bill would go into effect within 30 days of enactment but it is not retroactive for new purchases made earlier this year. For a more complete description of all the applicable situations, see the chart below:

Passenger Car		Light-Duty Truck		Large Light-Duty Truck (6,000-8,500 lbs.)		Work Truck (8,500-15,000 lbs.)
Minimum fuel economy for new vehicle		22 mpg (EPA combined)		18 mpg (EPA combined)		15 mpg (EPA combined)		Not applicable
$3,500 voucher		Mileage improvement of at least 4 mpg.		Mileage improvement of at least 2 mpg.		Mileage improvement of at least 1 mpg or trade-in of a work truck.		Trade-in must be at least pre-2002.
$4,500 voucher		Mileage improvement of at least 10 mpg.		Mileage improvement of at least 5 mpg.		Mileage improvement of at least 2 mpg.		NA
Source: House Committee on Energy and Commerce

For some time in the US, cars that can’t achieve a certain level of have what’s called a gas guzzler tax. It’s a somewhat reasonable tax if you want people to think green. However, a small tax is a small price to pay when you’re dropping $100,000+ for a brand new Mercedes-Benz CL63 or a $250,000 Ferrari <insert fast car here>. For those countries who have yet to mobilize via cars like the USA (China for example), the government is able to impose slightly more draconian taxes without backlash from the general population. Though I can’t say I agree with the government dictating what people’s behavior should be, it’s a more than effective method to take the “green” road. Here’s an example of some of the “tax reform” levels Chinese car buyers will see:

Engines smaller or equal to 1.0l – 1%

Engines over 1.0l but less than 2.0l – 5%

Engines over 2.2l but less than 3.0l – 9%

Engines over 3.0l but less than 4.0l – 25%

Engines over 4.0l – 40% 

While I applaud the Chinese for good intentions, you know what they say about good intentions. What about cars like the Chevy Corvette that gets mileage as good as any V6 sedan out there? What about engines that are turbo or supercharged? There is no final formula for the perfect way to tax cars. So, B+ for creative thinking and “good intentions”. F for execution. I just hope that American creativity and entrepreneurial spirt will yield a more reasonable solution to incentivizing small, efficient cars.

Source: China Car Times