Cash for Clunkers – An Uncertain Future

If you haven’t yet heard about the government’s Car Allowance Rebate System (CARS) program – more commonly known as “cash for clunkers” – it’s a program designed to help get the gas guzzling cars off the road, helping the environment and stimulating the economy at the same time. Basically, the program offers people who drive cars with a low MPG rating the chance to trade in their vehicles for a $4,500 rebate when they agree to buy a new car with a higher MPG rating.

However, the cash for clunkers program has run into some problems and it’s currently unclear as to how long it will be able to continue. For one thing, the Environmental Protection Agency (EPA) retracted some of its earlier car ratings, causing many of the car deals that were already pre-approved on the standards of the cash for clunkers program to lose their eligibility. No one is sure why the EPA changed these ratings at the last minute and disqualified so many car models, but it has caused a lot of confusion in the system.

Another problem is that the cash for clunkers program only began with an allotment of $1 billion, an amount that it’s already run through. In fact, in the five days between July 24th and July 29th, the program was quickly drained of money, as more than eight hundred million of the one billion dollars was claimed through trade ins. This left many people upset, as they had planned on using the rebate incentives to purchase a new car, but it didn’t appear that the money was going to be there for them. Even people who had made eligible trade ins weren’t sure if they’d be able to claim the credit or not – a situation that could have been disastrous if the government hadn’t stepped in.

Seeing that this was a very popular program that was doing its part to stimulate the economy, the House recently approved another two billion dollars in the cash for clunkers program. The bill is now waiting on the Senate, and if they pass it there will be a new infusion of money to keep the program going. Even though the rebate program was designed to help with the environment and to provide people with an incentive to buy greener vehicles, one side effect is that it has also helped to give the economy an extra boost as more people are purchasing cars in this slow market.

However, the program does have its critics. Some argue that such a large allocation of tax money should not be used to fund individual car purchases. After all, it is tax money that is being used for this program – the government simply doesn’t have billions of unaccounted for billions lying around. In addition, environmentalists argue that the rules are not stringent enough to effect significant environmental change, as the minimum new car miles per gallon is only 22 mph – which even some new SUVs achieve.

While it remains unclear if the cash for clunkers rebate program will be funded with the additional two billion dollars from the government, it is clear that the program has helped a lot of Americans make the decision to purchase a new, greener vehicle and provided a boost to the sagging auto industry. With this clear benefit, it’s probably only a matter of time until the program is funded once again to help more people buy vehicles that will work better for them.