Cash for Clunkers? Not for Sue

An incentive for the economy and the environment

Chris works at a hotel in downtown Sacramento, and lives just far enough away from mass transit that he needs a car to get to work. Chris had an accident recently and just found out that his Nissan truck with 300,000 miles is living on borrowed fumes.

Chris’ mother, Sue, has decided to buy a used or new car and let Chris buy her Toyota truck. Sue doesn’t really need a new car. Her 1996 Toyota T100 runs well, but Chris can’t afford a decent car, so Sue is thinking of buying a newer car, and selling the old car to her Son. A mothers peace of mind.

Sue would like to buy a hybrid truck, but they are “too expensive”. She has a great job, gets paid well, but like many others, she is watching her pennies. Her car would be considered a clunker by California and Congress standards.  It is a car they are willing to pay money to get off the road.

Would it be better for Sue to trade her 1996 truck in for the tax credit Congress is calling “Cash for clunkers”?

The first bill going through Congress would give $10,000 if one turns in an old gas guzzler for a newer more fuel-efficient car made in the United States of America. That bill is already getting backlash from foreign manufacturers, but even the Detroit 3 need to look at this bill. It may shed light on the fact that all of their vehicles are not made in America. With the signing of the North American Free Trade Agreement (NAFTA) there are cars that are built in North America, but not the United States of America.

The second measure (Bill S-247) introduced by Senators Feinstein, Collins, and Schumer would establish a National Incentive Program for voluntary retirement of fuel-inefficient vehicles. It would give a person up to $4,500 for their old car if they trade it in to a commercial entity (new or used car dealer) for a newer, more fuel-efficient car.

You would think that the older the car the more money, but Bill S-247 is just the opposite. The newer cars get the most trade-in, while an older car, such as Sue’s 1996 gets only $2,000 at most. I understand that the newer car is worth more, but isn’t this about getting the oldest cars off the road? One would assume that the older the car, the lower the income of the person that owns the car. Aren’t they going to need the most help?

People with a car this old typically buy a used car from a private individual. This would be a new revenue stream for dealers if Congress could get it right. Americans would get rid of some of the biggest evaporative emission polluters, the cars that cause asthma.

Would Sue make money on this venture if she met the criteria?

Sue would meet the first criteria because she doesn’t expect to buy a car that costs over $45,000. She wasn’t planning on buying a car that was as new as 2004, but if she could find something under $11,000 she would be interested.

Sue’s old 1996 Toyota T100 also meets the criteria that when the truck was new the fuel economy rating was less than 18 miles per gallon (as reported by the original manufacturer for purposes of CAFE compliance). According to fueleconomy.gov Sue’s 1996 T100 automatic 6-cylinder was 16 miles per gallon. In order to meet the new car fuel economy purchase Sue’s new car would have to exceeds the CAFE target by at least 25 percent. Sue would need to buy a car that got 20 miles per gallon, as set by the Environmental Protection Agency (EPA).

If Bill S-247 goes through Sue would receive a voucher for:

* The purchase of a new vehicle: $2,000 or
* The purchase of a used vehicle: $1,500 or
* Transit fare credit(for participating local public transportation agencies): $1,500

Sue lives in the country, so taking the $1,500 for transit fare wouldn’t work. She will have to buy a used or new car that gets at least 21 miles per gallon, costs less than $45,000 and is newer than 2004 to get the voucher.

She will probably end up buying a newer used car that gets fewer miles per gallon than a brand new car, but more miles than the vehicle she currently owns. Her husband wants her to get a 6-cylinder vehicle so that they can tow a camper. Sue would love a little racy car, but wants to wait two more years for that.

Anecdotal evidence says that this incentive is not going to get the older, pre-1998, cars off the road. Sue would have only received $2,000 IF she had purchased a NEW car. She got $3,000 from her Son for the old car. Another friend, Jill, has a 1995 vehicle and she said the same thing, “that amount of money isn’t going to get me to get rid of my car. I’ll drive the thing for another ten years and save more than that.”

Another reason Sue wouldn’t have received the credit is because the newer car Sue purchased didn’t meet the 25 percent more miles per gallon, according to the EPA, than her older one.

If Sue wasn’t going to sell her car to Chris she could have bought a newer truck from a commercial entity (get used to that term, it means new or used car dealer). She would have had to buy a different vehicle. Once again, I looked at fueleconomy.gov, and for a 6-cylinder manual 4WD (which is what Sue bought) the Toyota T100, or Tacoma never went up in miles per gallon by 25 percent, or 15 percent, or 10 percent.

But the price from a commercial entity did go up. There was a used 1997 Toyota T100 with 75,000 on autotrader.com through a used car dealer in the Auburn area. The starting price was $10,995. Sue bought her 1997 Toyota T100 for $6,500.

The main reason Sue wouldn’t get the credit is because she needed to sell the vehicle to her Son. “I’ll buy this car now and in two years I’ll sell it to one of my other sons and buy something I really want.”

Sue is right. 598,000 were laid off in January, 2009 and 626,000 applied for unemployment.

Sue needs to keep that boy driving to work.

About the Author:

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a member of the North American Car and Truck of the Year (NACTOY), Women's World Car of the Year (WWCOTY), and the Concept Car of the Year.