Incentives jump-start vehicle trade-ins

Posted April 02, 2009, at 7:57 p.m.

WASHINGTON — As lawmakers look for ways to give the ailing U.S. auto industry a lifesaving jolt, a plan to persuade drivers to trade in their old gas-guzzling vehicles for more fuel-efficient replacements with cash vouchers is gaining traction.

A bill sponsored in January by Sen. Dianne Feinstein, D-Calif., calls for a four-year program that would provide up to $4,500 for drivers who turn in a fuel-inefficient vehicle to be scrapped and buy a new or used vehicle which gets significantly better mileage.

The bill never made it into the final Recovery Act that President Obama signed in February, but on Tuesday the president said he would like to reshuffle some stimulus funds to pay for such a program.

“Such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel-efficient cars and purchase cleaner cars, have been successful in boosting auto sales in a number of European countries,” Obama said in a speech at the White House. “I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today.”

The legislation is seen as a way to stimulate demand for new cars, which have piled up at car dealerships and seaport lots amid a punishing economy. Franchised new car dealers sold 13.2 million new vehicles in 2008, down 18 percent from 2007, according to the National Automobile Dealers Association, as uncertain consumers hold on to their old cars.

“Taking these cars and trucks off our roads and highways would help reduce our dependence on foreign oil, decrease greenhouse gas emissions and stimulate the economy,” Sen. Susan Collins, R-Maine, one of the bill’s original co-sponsors, said in a statement.

Lawmakers have drafted several versions of the idea, including two slightly different proposals, one from Rep. Ron Paul, R-Texas, and the other from Rep. Betty Sutton, D-Ohio. A White House spokeswoman said the president has not endorsed any particular proposal, but said the effort will require legislation.

“We will be working closely with Congress to try to move legislation that meets the goal of both boosting auto sales and improving the fuel efficiency of the vehicle stock,” the spokeswoman said.

Under the Senate proposal, owners could trade in an old vehicle for any new or used vehicle that exceeds federal fuel economy standards for its class by at least 25 percent. Vouchers also could be redeemed for public transportation fares.

The trade-in must be a registered vehicle in “drivable condition” to qualify for a voucher, the act states, to prevent actual clunkers from being taken off junkyards to gain the credit. The value of the voucher rises progressively up to $4,500 for newer trade-ins and more fuel-efficient replacements. The replacement also must have a manufacturer’s suggested retail price of less than $45,000.

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