The US government’s cash for clunkers scheme

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President Obama had announced cash for scrapping of old cars scheme. This cash for clunkers bill has now been passed by the Senate and the President is expected to sign it. This bill will enable people who trade in their old gas guzzling cars for newer, more fuel efficient models, to get up to $4,500 as incentives.

The actual amount will depend on the car being traded in, how old it, how much it has run, what is the mileage it gets and also what is the mileage the new car gets. Thus the incentives could vary from $1,000 to $4,500. But even an old gas guzzling car which is traded in for a very energy efficient model can result in a saving of $4,500.

The idea behind this to replace most models which were sold after 1984, because by now they have become more energy inefficient with new cars being sold. Also this bill is meant to encourage the sales of new cars and bring some stability to the crises laden automobile market which has reported sluggish sales.

You cannot really buy an expensive car under this cash for clunkers scheme because the cost of the car should be $45,000 or less. The program has its critics as well because the profile of the potential customer would be one who has an old car and who has been thinking of trading in the vehicle, but actually does not have the money to do so. Another thing is that this is another form of bail-out for the auto industry, because the Congressional Committee has already approved $1 billion for this scheme which will go up to $4 billion.

But the beleaguered car dealers are enthusiastic about the scheme and hope to be able to advertise added incentives for traded in cars to lure customer to buy new cars. This would help the economy as well.