Business

‘Clunker Law’ confuses consumers, dealers

LYNN ? Owners of gas-guzzling cars and trucks could receive a voucher worth up to $4,500 toward the price of a new vehicle under the Cash for Clunkers legislation newly authorized by President Barack Obama, but the program isn’t without its flaws.Not every clunker qualifies for the program operated by the U.S. Department of Transportation. And like every give-away, there’s a long list of rules.First, the clunker potentially up for trade-in must be drivable, continuously registered and insured by the same owner for at least a year, be manufactured in 1984 or later and have a combined fuel economy rating of 18 mpg or less.The fuel rating can be determined by inputing the trade-in vehicle’s information online at www.fueleconomy.gov.For example, a gas-hog like the 2000 Jeep Grand Cherokee with an 8-cylinder engine gets a combined rating of 15 mpg, with an average city driving rating of 13 mpg and a highway rating of 19 mpg. As a result, this vehicle would seemingly qualify for the Cash for Clunkers program, but perhaps not for the entire $4,500 voucher.Not so – if the buyer is in the market for a 2009 Jeep Grand Cherokee. The new Jeep gets only 17 mpg, making it ineligible.Clearly the program is more complicated than plugging in your car’s data and getting a combined fuel-consumption rating. It’s also necessary to determine the fuel-consumption rating of the new vehicle. The combined fuel economy rating of the new car must exceed the clunker’s rating by 10 mpg or more, while a new pickup truck’s rating must exceed the trade-in’s rating by 15 mpg or more.In other words, to get the full voucher amount, the owner of a vehicle with a combined fuel-efficiency rating of 15 mpg must purchase a new car with a combined rating of at least 25 mpg.The vouchers are designed to stimulate the sluggish sales of new cars and trucks. Funding is contained in the government’s $787 billion economic stimulus recovery plan and could reach $4 billion, depending on its relative success or failure.The Cash for Clunkers provision was passed as part of a larger $106 billion military spending bill. President Obama signed the legislation, formerly known as the Car Allowance Rebate System (CARS), into law on June 24.The program ends Nov. 1 and it applies only to the purchase or lease of new vehicles. Cars and trucks over 25 years old do not qualify as trade-ins. Although the program is described as a voucher system, no actual voucher is used during the sale. The participating automobile dealer applies the discount to the purchase price.According to BusinessWeek magazine, the program is a lemon and a waste of taxpayer dollars.Citing auto industry and bond experts, the magazine contends the government has not provided adequate funding, since the current $1 billion appropriated can help fund the purchase of a mere 250,000 cars – about a week’s worth at present summer sales levels.Further, the program makes little sense for most passenger-car owners, since most of those cars on the road already get more than 18 mpg and therefore would not qualify. Besides, if a consumer can sell their old car for more than the $3,500 to $4,500 potentially offered by the government, there’s no reason to take advantage of the Cash for Clunkers program, the experts told BusinessWeek.Industry observers have also noted that people driving cars more than 10 years old often purchase another used vehicle and even with a $4,500 discount they’re highly unlikely to take on new-car payments, especially during tough economic times.If the program succeeds, the government already has announced it will move to supplement the voucher system with another $3 billion.”It’s a confusing program, full of holes, and nobody understands it,” said Brian Kelly, president of Kelly Automotive Group, comprised of several dealerships on the North Shore. “The burden is all on the dealer to determine if a car qualifies. If the dealer gives the discount and then the car doesn’t qualify for some reason, we’d be left

More Stories In Business