Congress May Give $4500 Credits for Turning in Gas Guzzlers

[samclem]

New legislation would give people up to $4500 if they trade in a gas guzzler. Here's the AP story.

In part:

Drivers would be eligible for reimbursement for purchase of a new or used vehicle with a fuel economy rating that exceeds federal targets for that class of vehicle by at least 25 percent. The vehicle must have a manufacturer suggested retail price of less than $45,000 and be a model year 2004 or later.
The vehicles turned in must be drivable, registered in the United States and have a when-new fuel economy rating of less than 18 miles per gallon.
In the first year of the program, a person trading in a vehicle that is model year 2002 and later would be eligible to receive $4,500 for purchase of a new vehicle, $3,000 for purchase of a used vehicle or $3,000 for transit fare credit. For model year vehicles 1999 to 2001, drivers would get $3,000 for the purchase of a new vehicle. Those who trade in vehicles that came out in 1998 or before could get a credit of $2,000 for a new vehicle.

I heard a news commentator saying that one thing delaying this bill was that Congress was trying to find a way to favor purchase of American-built (??) cars, but without triggering retribution from overseas. Good luck with that.

Observations:
- If you can get a $3000 "transit fare credit," then it sounds like you don't need to purchase a replacement vehicle at all in order to get this money/benefit.
- This will have the short term effect of depressing auto sales as people wait to see what the final legislation looks like. Dealers sure don't need that.
- Will car prices just jump by some portion of the credit amount? That's the usual pattern with targeted rebates (e.g. the government rebate for hybrids--when the rebate ended, the prices went down). Because this is less direct, I'd imagine the price bump-up will be less as well.
- There's money to be made! Buy a bunch of wrecked/flood damaged, 2002 or newer vehicles and get 'em running (they don't need to run well, at least in my state, the DMV doesn't inspect cars when you register them. It's not clear who would determine the vehicles were "drivable").
Then sell them to people looking for a new car--it would be worth up to $4500 to them. This is the behavior that Congress is incentivizing.
- The story doesn't say what happens to the cars turned in. If they are re-od, then there's no reduction in gas use. If they are not put back into service, then the law will result in some degree of increased energy use as these older (ostensibly serviceable) cars are melted down and re-formed into vehicles. The embodied energy bound up in a car is tremendous, and crushing cars, even ones that get poor mileage, if they can still be useful will not necessarily save fuel.

Another helpful idea from Congress. After all, apparently it is the unused vehicles sitting in the driveways that are burning up the gasoline. If they want to reduce gasoline use and get us to purchase fuel efficient cars--why not raise the gas tax (and reduce other taxes commensurately--ha, ha!)

 

[Midpack]

Perfectly consistent with most everything else that's going on. Let's reward people for their mistakes at the expense of others who tried to do the right thing to begin with. Mortgage you can't afford, no problem. Overwhelming credit card debt, no problem. Lost your job, no problem (see stimulus pkg). Gas guzzler, no problem.

Sheeeeeeeeeeesh...

 

[ziggy29]

Perfectly consistent with most everything else that's going on. Let's reward people for their mistakes at the expense of others who tried to do the right thing to begin with. Mortgage you can't afford, no problem. Overwhelming credit card debt, no problem. Lost your job, no problem (see stimulus pkg). Gas guzzler, no problem.

Other than the "lost your job" part, I agree. Plenty of very employable people (usually) who work hard and effectively, and who keep their skill sets up are still being laid off and having a miserable time finding other work in this economy. I hardly fault them for their unfortunate employment situation.

 

[NW-Bound]

This is reminiscent of a fiasco in Arizona in 2000. Back then, the AZ house speaker Jeff Groscost (R) was the architect of this program and all the less-popular alternative fuel programs that preceded it since 1993.

His brilliant idea was to sneak into the law a generous credit for cars that could run on both gasoline and propane. In the public outcry that ensued, the then Governor admitted that she signed it into law without reading it. Anyway, just overnight, some outfits popped up offering to add a tiny propane bottle to the trunk of certain spanking new trucks or SUVs along with a retrofitted carburetor. Voilà! You just got your new vehicle subsidized by the taxpayers to the tune of several thousand dollars. (Hint - You do not need to refill that tiny propane bottle. Heck, you do not even have to carry its dead weight. Just jettison it after registration)

It was subsequently found that Groscot earned tens of thousands of dollars in 1998 consulting out of state for natural gas companies, and was also involved in some businesses that would perform the fuel conversion retrofitting.

The public outcry over the potential devastating cost of $600M resulted in several law changes to reduce that to $200M. Groscost lost the next election, and died in 2006 at the mere age of 45. I remember following the national media to see if there was any coverage of our shameful state debacle, but there was none.

The cars that had this special registration were given a special license plate to denote their "green" status. Amidst the public outrage, there were talks of militants targeting those cars for vandalism. Oh, what a fun time!

Being somewhat trusting, I finally learn to view any law with jaundiced eye. I am not willing to give any politician or law maker the benefits of the doubt. Whether by malice or well-intentioned stupidity, it can still hurt. It's sad, I know.

 

[growing_older]

If someone was considering buying a new car, this "pending" legislation might also make them wait to see if the tax credit will be enacted or not. For almost $5000 benefit, this likely stops many pending sales, which cannot be helping dealers any.

 

[OAG]

Well there goes my 05 Lexus; for a trade in on a NEW Mercedes Benz C230. Lets see drive something that gets a estimated 16 MPG (but I get over 20 by driving sensibly (hypermiling a bit). Spend $45K for a $4.5 Credit on my taxes (wonder if that will be credit or a deduction). So now the cost is $40.5. I have to ask myself would I trade my current wheels IF I could get a new C230 for $40.5 now. Of course I would NOT. So why do it with the credit/deduction? Just more BS from our "what the h**l do we do now" politicians.