Cash for Clunkers Program,
more clunky than cash

Assuming the program is still available when you get this newsletter, we have several questions about the Cash for Clunkers plan and at first glance it looks like a pretty good idea if you are considering the purchase of a new car. After a little examination and thought, it doesn’t seem nearly as attractive or effective as we have been led to believe.

If you have a “clunker” that you want to get rid of and have the credit worthiness to qualify for a new car loan, and don’t mind taking on new debt during the present financial crisis, then maybe you will benefit from the program.
A clunker is defined as any car built after 1984, getting less than 18 miles per gallon. To qualify for the new voucher program the clunker has to have been owned, registered and insured by the same person for at least one year prior to consideration for trade in.

Once traded in the clunker will be destroyed, not to re-enter the vehicle market as a drivable vehicle or as salvage parts. That means that all you are going to get is the value of the voucher regardless of the marketable value of the vehicle.

To qualify for a $3500 voucher you have to trade the clunker in for a car getting at least 22 miles per gallon, a net improvement of at least 4 mpg.

To qualify for a $4500 voucher you would have to trade into a car that has a rating of at least 10 mpg higher than your clunker.\ For small trucks and SUV’s (under 6000 pounds) the mileage increase is much less. The new truck has to get at least 18 mpg and the improvement from the traded in clunker can be as little as 2 mpg for a $3500 voucher and 5 mpg for $4500.

For larger SUVs and pick-ups (6000 to 8500 pounds) the minimum fuel economy must be at least 15 mpg and the improvement must be at least one mpg over the trade-in for $3500 and two mpg for $4500. 

In any case, the new vehicle cannot cost more than $45000.

There are no restrictions on manufacturer. Either domestic or imports are allowed as long as the mileage criterion is met.

Proponents of the plan claim as many as two million new car sales will be stimulated by this incentive package, however many in the automotive industry and the financial markets feel this estimate is grossly overstated.

The destruction of the clunker limits its value as a trade-in to a maximum of $4500 thus eliminating most cars less than 10 years old. A person owning a car of greater value receives no incentive to trade.

Likewise a person owning a car that already gets reasonably good gas mileage would have little or no incentive to trade. In order to reach the improvement in mileage needed to qualify, they would most likely have to downsize the vehicle that they drive.

Finally, this grand plan pre-supposes that the person wishing to make use of it will qualify for financing. Most cars that would pass the clunker test are not in the hands of the original new car buyer. They are in the second or third tier of ownership, having passed from the new car buyer, to the “clean used car” market and possibly into the “we tote the note” segment. This segment of the car buying public seldom buys a new car, and it is unlikely that even a $4500 incentive will improve his credit or personal finances enough to make a new car loan possible.
Many of us have an older car or pick-up in our fleet that we use on weekends or maybe one of the kids drives to school. Replacing that vehicle with a 20 or 30 thousand dollar replacement, taking on a five year note and increased insurance costs may not make good financial sense.

Of course if “they” can get us thinking about a great deal on a new car and get us into the dealership, they have a shot at selling us a new car even if we do not qualify for the incentive.

Remember the old saying..."If it looks to good to be true...it probably isn't as good as it looks."

For the latest on the Car Allowance Rebate System visit
http://www.cars.gov

Take care out there!

Get the Government to
pay for your car repair.

In these trying financial times any way that we can save a few dollars is a help to the budget. We have all heard of programs that will pay several thousand dollars for our old car if we are willing to trade it in on a new higher mileage vehicle. Of course many of us do not want to take on tens of thousands of dollars in new debt right now. We don’t need another car payment facing us in uncertain times.  So how about a program that will give us money to repair the car we have helping us to keep it on the road another year while we work on getting our finances in shape! Here’s how you can get up to $600 to turn off that bothersome check engine light.

The Air Check Texas Low Income Repair Assistance Program will do just that for us. Now don’t be turned off by that Low Income clause, what Texas considers low income may surprise you. A family of 4 can have a TAKE HOME pay of $66,150 and qualify for the $600 voucher to repair a car.

The money can only be used to repair emissions related problems and to qualify the car must pass the safety part of the annual state inspection. Once the car has failed the emissions portion of the test you can apply to the Air Check program.  A qualified emission repair facility, like Freedom Automotive, will diagnose the vehicle and contact Air Check with the estimate for approval. Once approved the program pays the shop by credit card, except for a $30 deductible due from you.

When your check engine light comes on, or your car starts to run bad have it checked for state emissions inspection. If it would fail the test you could very well get the State to pay for the repair. If the check engine light is glowing on a car newer that 1995 it would fail the test. On earlier models we would have to do an actual dynamometer emissions test.  

Remember, your State Inspection sticker may not be due yet, but that doesn’t mean you can’t have it checked at any time during the year. If the Check Engine light is on the car is polluting our air and that is what this program is all about, reducing emissions.

Even if you do not qualify because of income you probably know someone who will qualify. Our kids, our parents, co-workers and people we go to church with may all qualify for this help with car repairs.

The funds for this program do not come from the normal tax sources. The revenue comes from a $6 fee on every State inspection we have done on 1996 and newer cars and light trucks. Bet you didn’t know you were being so generous!

The following table outlines the income levels that qualify for this program. Keep in mind that these are the take home, or net, income, not the gross, pre-tax amount on the paycheck.

For more information go online to http://www.h-gac.com or give us a call at Freedom Automotive.