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I Have Two Clunkers

July 21st, 2009

Most everyone who cares about cars has heard of the Cash for Clunkers program by now.  Basically, if you trade in your clunker for a more fuel-efficient vehicle, you get an instant credit of either $3,500 or $4,500, depending on the type and mileage of the traded-in vehicle and the vehicle being purchased or leased (with  various restrictions).  This program is intended to have the dual benefits of accelerating the transition of our nation’s light-duty vehicle fleet to a more fuel-efficient one, as well as helping to stimulate an auto industry that’s currently in dire straits.  (Plus, folks buying a new car can get a substantial discount – not bad, politically!)

But, what constitutes a clunker?  Essentially, it’s a car that you’ve driven for at least a year, and that has a combined city/highway fuel economy rating of 18 mpg or less.  Also, it has to be newer than 25 years old.  This means my wife’s Buick Enclave, which we bought new in 2007, and which has a combined rating of 18 mpg, qualifies.  My truck, which on its last tank averaged 12.4 mpg, and which doesn’t have an official fuel economy rating, qualifies as a “Category 3” work truck.  We could trade both these vehicles in today and take advantage of the program.

Crushed CarsThis got me thinking – I wonder how effective the Car Allowance Rebate System (CARS) will have been once it concludes on November 1 (unless funds run out first).  The goal of stimulating the auto industry will almost certainly be reached.  It’s the other goal that worries me.  Who will take advantage of the program?  If consumers who had already planned to purchase a new vehicle are swayed towards a more fuel-efficient choice because of CARS, then that would be wonderful.  On the other hand, if folks are tempted to trade-in a nearly-new vehicle, or one that doesn’t get driven very often, simply to get their slice of the government pie, then the overall benefit could be negative.  After all, the program mandates that traded-in vehicles be shredded or crushed (and hopefully recycled) so that they aren’t resold as used vehicles.  And using my truck – which I probably drove less than 3000 miles in the past year – as an example, the net environmental impact of building a new vehicle (and scrapping the old) is likely negative when that vehicle is rarely used.

I hope the CARS program proves to be an effective mechanism for reaching both goals.  But as for me – I’m keeping my two clunkers.

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