Cars for Clunkers a Good Deal…or Not?

June 25, 2009

On June 24th President Obama signed into law the “Cash for Clunkers” bill in yet another effort to hopefully encourage, and help, more consumers purchase a new car. However, the signature kicks off a 30-day period in which the Transportation Department will prepare regulations for the program. The National Automobile Dealers Association is advising dealers to wait until the rules are out late next month before participating.

As I understand now, under this new law, if a consumer has an older car that gets poor mileage - but not more than 25 years old - and they have owned said car for at least one year, they can drive it to the Dealership and maybe get a $4,500 credit towards a new, more fuel-efficient car. I say maybe because it is the Dealers’ discretion who they give the credit to. Sound fair?

According to an article on cnnmoney.com, the program is itself a clunker:

Here’s why it won’t do most people much good: The government refund vouchers for $3,500 or $4,500 are in replacement of — not in addition to — the ordinary trade-in value of the vehicle, which in many instances will be worth more than the voucher.

“It’s not a rebate,” pointed out Jeremy Anwyl, chief executive of the auto Web site Edmunds.com. “It’s a minimum trade-in allowance.”

If your trade-in is worth more than the voucher amount, you’d be better off just trading your car in as you ordinarily would and not even bothering with the “Cash for Clunkers” program. Even if your vehicle is worth a little less than that amount — say, $3,000 instead of $3,500 — you will be $500 better off under “Cash for Clunkers.” But it you weren’t ready to buy a car before, is $500 going to make the difference?

What is your opinion on this new law? Good for consumers, or not? E-mail me at blogger@matadorsmoneymatters.com.

Learn for yourself. Get more information on the Cash for Clunkers program!

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