Hybrid Car Review

The 'Cash for Clunkers' (or as it is known in the bill: "Consumer Assistance to Recycle and Save Act of 2009" or CARS act)  bill has passed the Senate and House (although there was a bit of doubt there at the end) and is being sent to President Obama to be signed.  Part of a $106 billion war appropriations bill, the $1 billion program is intended to help push new car sales, while also pushing for higher fuel economy.

The question becomes with the restrictions set in place, who's going to make use of the program and what are they most likely to buy in return?  More on that later.

If you don't know, the CARS Act of 2009 will give consumers a voucher for up to $4,500 in value to purchase or lease a new vehicle.  The trade in will be crushed.  At first, the bill was intended to improve the fuel economy of the fleet of cars in the US, but the recession has rolled back the good intentions and has instead become a subsidy for the automotive market.  And just to be safe (???) the program will only run for four months, unless Congress comes backs and funds it again for the full $4 billion it was initially set for.

An earlier version of the bill had some drastic differences set up between the used trade-in and the new car to ensure the new vehicle purchased would truly increase the fuel efficiency of the fleet of vehicles in the US, but the watered down version that passed isn't quite as stringent.

The program will go into affect 30 days after Obama signs it, and will end on October 31, 2009.  Just four short months to spend $1 billion on new vehicles.

Consumers who turn in their old cars can get up to $4,500 in a voucher they can use on a new vehicle.

(A) the new fuel efficient automobile is a passenger automobile and the combined fuel economy value of such automobile is at least 10 miles per gallon higher than the combined fuel economy value of the eligible trade in vehicle;
(B) the new fuel efficient automobile is a category 1 truck and the combined fuel economy value of such truck is at least 5 miles per gallon higher than the combined fuel economy value of the eligible trade-in vehicle; or
(C) the new fuel efficient automobile is a category 2 truck that has a combined fuel economy value of at least 15 miles per gallon and the combined fuel economy value of such truck is at least 2 miles per gallon higher than the combined fuel economy value of the eligible tradein vehicle and the eligible trade-in vehicle is a category 2 truck.

Or you can get $3,500 voucher for trading an older vehicle to be scrapped, if:

(A) the new fuel efficient automobile is a passenger automobile and the combined fuel economy value of such automobile is at least 4 miles per gallon higher than the combined fuel economy value of the eligible trade-in vehicle;
(B) the new fuel efficient automobile is a category 1 truck and the combined fuel economy value of such truck is at least 2 miles per gallon higher than the combined fuel economy value of the eligible trade-in vehicle;
(C) the new fuel efficient automobile is a category 2 truck that has a combined fuel economy value of at least 15 miles per gallon and—
(i) the eligible trade-in vehicle is a category 2 truck and the combined fuel economy value of the
new fuel efficient automobile is at least 1 mile per gallon higher than the combined fuel economy value of the eligible trade-in vehicle; or
(ii) the eligible trade-in vehicle is a category 3 truck of model year 2001 or earlier; or
(D) the new fuel efficient automobile is a category 3 truck and the eligible trade-in vehicle is a category 3 truck of model year of 2001 or earlier and is of similar size or larger than the new fuel efficient automobile as determined in a manner prescribed by the Secretary.

Who's Happy and Who Isn't
The total overall difference in fuel economy improvement isn't going to be much, and lots of groups you would expect to support the measure have already made their impressions clear.

But car makers (including foreign automakers) dealers, and the companies that supply them are very happy about it.  Faced with sales that have dropped 30-50% over the past year, bankruptcy, and suppliers going out of business, auto makers have been pushing for this bill for a while.  Especially after seeing the success the 'cash for clunkers' bill had in Germany.  According Dave McCurdy, chairman of the Alliance of Automobile Manufacturers:

This legislation has been one of our top priorities. It will help restore consumer confidence in the economy by stimulating vehicle sales; while at the same time benefiting the environment by replacing older vehicles with cleaner and more fuel-efficient autos. Cash for clunkers will benefit everyone from the consumer looking for the extra incentive to purchase a new car, to the communities who will receive additional tax revenue from the sales of new vehicles.

The $1 billion should subsidize up to 250,000 vehicle sales, which is only 2.5% of the annual rate of 9.9 million units sold in May.  (Edmunds has already said the 250,000 mark may be hard to reach.  Edmunds has also compiled a list of vehicles that are worth trading in for the voucher (pdf) ) So it's uncertain how much of a difference this will make.  Also, the subsidy will be aimed at those people who can afford new vehicles, not the poor who are more likely to be purchasing the clunkers that are going to be crushed.

Also, the number of vehicles it would be worth trading in for the voucher has to be limited.  The vehicle needs to be under the fuel efficiency guideline, plus be worth less than $4,500 (or $3,500). 

Will this Benefit Hybrid Cars or Even Fuel Efficiency?
My first thought is this could be a boon to hybrid car sales, since hybrids will certainly be more fuel efficient than the vehicles being traded in.  But it's unclear whether that will indeed be the case.  With the 'watered' down version passing, you don't necessarily need to get a really fuel effiicient vehicle to replace the old one.

Looking at the list of vehicles that it would make sense to trade-in under this program, it seems like an overwhelming majority of them are large trucks, vans and large SUVs. And is someone who owns a large, older, inefficient vehicle that was probably purchased for a specific purpose (large family, towing capacity, work truck, etc...) going to be interested in a hybrid?  Won't the consumer most likely turn in their truck for a slightly more efficient newer truck?  Which makes me wonder about the one year ownership rule.  If someone wants to buy your used 'clunker', then use it to purchase a more fuel efficient vehicle, what's wrong with that?

Some other things you might not know about the Cash for Clunkers Bill:

• Dealers must be certified
• A website will be set up to explain all the nuances for obtaining and using the vouchers (www.cars.gov)
  
• The voucher can be used to purchase or lease a vehicle.
• No more than one voucher per person, and no combination of vouchers to purchase a single vehicle.
• Only 7.5 percent of the $1 billion can go to Category 3 trucks (Work Truck).
  
• The vehicle being trade-in has to be in drivable condition, owned by the same person for one year, and be manufactured less than 25 years ago.
• The new car being purchased cannot have the legal title transferred to anyone else prior to the 'ultimate purchaser,' cannot be worth more than $45,000, and must get at least 22 mpg (automobile), 18 mpg for a category 1 truck or 15 mpg for a category 2 truck.
• Fraud will be punished with fines of no more than $15,000 per violation
  

Keep reading for the full text of the bill (pdf):

TITLE XIII—CONSUMER ASSISTANCE TO RECYCLE AND
SAVE PROGRAM
SEC. 1301. SHORT TITLE.—This title may be cited as the ‘‘Consumer
Assistance to Recycle and Save Act of 2009’’.
SEC. 1302. CONSUMER ASSISTANCE TO RECYCLE AND SAVE PROGRAM.—(
a) ESTABLISHMENT.—There is established in the National
Highway Traffic Safety Administration a voluntary program to
be known as the ‘‘Consumer Assistance to Recycle and Save Program’’
through which the Secretary, in accordance with this section
and the regulations promulgated under subsection (d), shall—
(1) authorize the issuance of an electronic voucher, subject
to the specifications set forth in subsection (c), to offset the
purchase price or lease price for a qualifying lease of a new
fuel efficient automobile upon the surrender of an eligible tradein
vehicle to a dealer participating in the Program;
(2) register dealers for participation in the Program and
require that all registered dealers—
(A) accept vouchers as provided in this section as partial
payment or down payment for the purchase or qualifying
lease of any new fuel efficient automobile offered
for sale or lease by that dealer; and
(B) in accordance with subsection (c)(2), to transfer
each eligible trade-in vehicle surrendered to the dealer
under the Program to an entity for disposal;
(3) in consultation with the Secretary of the Treasury,
make electronic payments to dealers for eligible transactions
by such dealers, in accordance with the regulations issued
under subsection (d); and
(4) in consultation with the Secretary of the Treasury and
the Inspector General of the Department of Transportation,
establish and provide for the enforcement of measures to prevent
and penalize fraud under the program.
(b) QUALIFICATIONS FOR AND VALUE OF VOUCHERS.—A voucher
issued under the Program shall have a value that may be applied
to offset the purchase price or lease price for a qualifying lease
of a new fuel efficient automobile as follows:
(1) $3,500 VALUE.—The voucher may be used to offset the
purchase price or lease price of the new fuel efficient automobile
by $3,500 if—
(A) the new fuel efficient automobile is a passenger
automobile and the combined fuel economy value of such
automobile is at least 4 miles per gallon higher than the
combined fuel economy value of the eligible trade-in vehicle;

(B) the new fuel efficient automobile is a category
1 truck and the combined fuel economy value of such
truck is at least 2 miles per gallon higher than the combined
fuel economy value of the eligible trade-in vehicle;
(C) the new fuel efficient automobile is a category
2 truck that has a combined fuel economy value of at
least 15 miles per gallon and—
(i) the eligible trade-in vehicle is a category 2
truck and the combined fuel economy value of the
new fuel efficient automobile is at least 1 mile per
gallon higher than the combined fuel economy value
of the eligible trade-in vehicle; or
(ii) the eligible trade-in vehicle is a category 3
truck of model year 2001 or earlier; or
(D) the new fuel efficient automobile is a category
3 truck and the eligible trade-in vehicle is a category 3
truck of model year of 2001 or earlier and is of similar
size or larger than the new fuel efficient automobile as
determined in a manner prescribed by the Secretary.
(2) $4,500 VALUE.—The voucher may be used to offset the
purchase price or lease price of the new fuel efficient automobile
by $4,500 if—
(A) the new fuel efficient automobile is a passenger
automobile and the combined fuel economy value of such
automobile is at least 10 miles per gallon higher than
the combined fuel economy value of the eligible tradein
vehicle;
(B) the new fuel efficient automobile is a category
1 truck and the combined fuel economy value of such
truck is at least 5 miles per gallon higher than the combined
fuel economy value of the eligible trade-in vehicle;
or
(C) the new fuel efficient automobile is a category
2 truck that has a combined fuel economy value of at
least 15 miles per gallon and the combined fuel economy
value of such truck is at least 2 miles per gallon higher
than the combined fuel economy value of the eligible tradein
vehicle and the eligible trade-in vehicle is a category
2 truck.
(c) PROGRAM SPECIFICATIONS.—
(1) LIMITATIONS.—
(A) GENERAL PERIOD OF ELIGIBILITY.—A voucher issued
under the Program shall be used only in connection with
the purchase or qualifying lease of new fuel efficient automobiles
that occur between July 1, 2009 and November
1, 2009.
(B) NUMBER OF VOUCHERS PER PERSON AND PER TRADEIN
VEHICLE.—Not more than 1 voucher may be issued for
a single person and not more than 1 voucher may be
issued for the joint registered owners of a single eligible
trade-in vehicle.
(C) NO COMBINATION OF VOUCHERS.—Only 1 voucher
issued under the Program may be applied toward the purchase
or qualifying lease of a single new fuel efficient
automobile.
(D) CAP ON FUNDS FOR CATEGORY 3 TRUCKS.—Not more
than 7.5 percent of the total funds made available for
the Program shall be used for vouchers for the purchase
or qualifying lease of category 3 trucks.
(E) COMBINATION WITH OTHER INCENTIVES PERMITTED.—
The availability or use of a Federal, State, or
local incentive or a State-issued voucher for the purchase
or lease of a new fuel efficient automobile shall not limit
the value or issuance of a voucher under the Program
to any person otherwise eligible to receive such a voucher.
(F) NO ADDITIONAL FEES.—A dealer participating in
the program may not charge a person purchasing or leasing
a new fuel efficient automobile any additional fees associated
with the use of a voucher under the Program.
(G) NUMBER AND AMOUNT.—The total number and
value of vouchers issued under the Program may not exceed
the amounts appropriated for such purpose.
(2) DISPOSITION OF ELIGIBLE TRADE-IN VEHICLES.—
(A) IN GENERAL.—For each eligible trade-in vehicle
surrendered to a dealer under the Program, the dealer
shall certify to the Secretary, in such manner as the Secretary
shall prescribe by rule, that the dealer—
(i) has not and will not sell, lease, exchange, or
otherwise dispose of the vehicle for use as an automobile
in the United States or in any other country;
and
(ii) will transfer the vehicle (including the engine
block), in such manner as the Secretary prescribes,
to an entity that will ensure that the vehicle—
(I) will be crushed or shredded within such
period and in such manner as the Secretary prescribes;
and
(II) has not been, and will not be, sold, leased,
exchanged, or otherwise disposed of for use as
an automobile in the United States or in any other
country.
(B) SAVINGS PROVISION.—Nothing in subparagraph (A)
may be construed to preclude a person who is responsible
for ensuring that the vehicle is crushed or shredded from—
(i) selling any parts of the disposed vehicle other
than the engine block and drive train (unless with
respect to the drive train, the transmission, drive shaft,
or rear end are sold as separate parts); or
(ii) retaining the proceeds from such sale.
(C) COORDINATION.—The Secretary shall coordinate
with the Attorney General to ensure that the National
Motor Vehicle Title Information System and other publicly
accessible systems are appropriately updated on a timely
basis to reflect the crushing or shredding of vehicles under
this section and appropriate reclassification of the vehicles’
titles. The commercial market shall also have electronic
and commercial access to the vehicle identification numbers
of vehicles that have been disposed of on a timely basis.
(d) REGULATIONS.—Notwithstanding the requirements of section
553 of title 5, United States Code, the Secretary shall promulgate
final regulations to implement the Program not later than
30 days after the date of the enactment of this Act. Such regulations
shall—
(1) provide for a means of registering dealers for participation
in the Program;
(2) establish procedures for the reimbursement of dealers
participating in the Program to be made through electronic
transfer of funds for the amount of the vouchers as soon as
practicable but no longer than 10 days after the submission
of information supporting the eligible transaction, as deemed
appropriate by the Secretary;
(3) require the dealer to use the voucher in addition to
any other rebate or discount advertised by the dealer or offered
by the manufacturer for the new fuel efficient automobile and
prohibit the dealer from using the voucher to offset any such
other rebate or discount;
(4) require dealers to disclose to the person trading in
an eligible trade-in vehicle the best estimate of the scrappage
value of such vehicle and to permit the dealer to retain $50
of any amounts paid to the dealer for scrappage of the automobile
as payment for any administrative costs to the dealer
associated with participation in the Program;
(5) consistent with subsection (c)(2), establish requirements
and procedures for the disposal of eligible trade-in vehicles
and provide such information as may be necessary to entities
engaged in such disposal to ensure that such vehicles are
disposed of in accordance with such requirements and procedures,
including—
(A) requirements for the removal and appropriate disposition
of refrigerants, antifreeze, lead products, mercury
switches, and such other toxic or hazardous vehicle components
prior to the crushing or shredding of an eligible
trade-in vehicle, in accordance with rules established by
the Secretary in consultation with the Administrator of
the Environmental Protection Agency, and in accordance
with other applicable Federal or State requirements;
(B) a mechanism for dealers to certify to the Secretary
that each eligible trade-in vehicle will be transferred to
an entity that will ensure that the vehicle is disposed
of, in accordance with such requirements and procedures,
and to submit the vehicle identification numbers of the
vehicles disposed of and the new fuel efficient automobile
purchased with each voucher;
(C) a mechanism for obtaining such other certifications
as deemed necessary by the Secretary from entities engaged
in vehicle disposal; and
(D) a list of entities to which dealers may transfer
eligible trade-in vehicles for disposal; and
(6) provide for the enforcement of the penalties described
in subsection (e).
(e) ANTI-FRAUD PROVISIONS.—
(1) VIOLATION.—It shall be unlawful for any person to
violate any provision under this section or any regulations
issued pursuant to subsection (d) (other than by making a
clerical error).
(2) PENALTIES.—Any person who commits a violation
described in paragraph (1) shall be liable to the United States
Government for a civil penalty of not more than $15,000 for
each violation. The Secretary shall have the authority to assess
and compromise such penalties, and shall have the authority
H. R. 2346—55
to require from any entity the records and inspections necessary
to enforce this program. In determining the amount of the
civil penalty, the severity of the violation and the intent and
history of the person committing the violation shall be taken
into account.
(f) INFORMATION TO CONSUMERS AND DEALERS.—Not later than
30 days after the date of the enactment of this Act, and promptly
upon the update of any relevant information, the Secretary, in
consultation with the Administrator of the Environmental Protection
Agency, shall make available on an Internet website and
through other means determined by the Secretary information about
the Program, including—
(1) how to determine if a vehicle is an eligible tradein
vehicle;
(2) how to participate in the Program, including how to
determine participating dealers; and
(3) a comprehensive list, by make and model, of new fuel
efficient automobiles meeting the requirements of the Program.
Once such information is available, the Secretary shall conduct
a public awareness campaign to inform consumers about the Program
and where to obtain additional information.
(g) RECORD KEEPING AND REPORT.—
(1) DATABASE.—The Secretary shall maintain a database
of the vehicle identification numbers of all new fuel efficient
vehicles purchased or leased and all eligible trade-in vehicles
disposed of under the Program.
(2) REPORT ON EFFICACY OF THE PROGRAM.—Not later than
60 days after the termination date described in subsection
(c)(1)(A), the Secretary shall submit a report to the Committee
on Energy and Commerce of the House of Representatives
and the Committee on Commerce, Science, and Transportation
of the Senate describing the efficacy of the Program, including—
(A) a description of Program results, including—
(i) the total number and amount of vouchers issued
for purchase or lease of new fuel efficient automobiles
by manufacturer (including aggregate information concerning
the make, model, model year) and category
of automobile;
(ii) aggregate information regarding the make,
model, model year, and manufacturing location of
vehicles traded in under the Program; and
(iii) the location of sale or lease;
(B) an estimate of the overall increase in fuel efficiency
in terms of miles per gallon, total annual oil savings, and
total annual greenhouse gas reductions, as a result of the
Program; and
(C) an estimate of the overall economic and employment
effects of the Program.
(h) EXCLUSION OF VOUCHERS FROM INCOME.—
(1) FOR PURPOSES OF ALL FEDERAL AND STATE PROGRAMS.—
A voucher issued under this program or any payment made
for such a voucher pursuant to subsection (a)(3) shall not be
regarded as income and shall not be regarded as a resource
for the month of receipt of the voucher and the following 12
months, for purposes of determining the eligibility of the
recipient of the voucher (or the recipient’s spouse or other
family or household members) for benefits or assistance, or
H. R. 2346—56
the amount or extent of benefits or assistance, under any Federal
or State program.
(2) FOR PURPOSES OF TAXATION.—A voucher issued under
the program or any payment made for such a voucher pursuant
to subsection (a)(3) shall not be considered as gross income
of the purchaser of a vehicle for purposes of the Internal Revenue
Code of 1986.
(i) DEFINITIONS.—As used in this section—
(1) the term ‘‘passenger automobile’’ means a passenger
automobile, as defined in section 32901(a)(18) of title 49, United
States Code, that has a combined fuel economy value of at
least 22 miles per gallon;
(2) the term ‘‘category 1 truck’’ means a nonpassenger
automobile, as defined in section 32901(a)(17) of title 49, United
States Code, that has a combined fuel economy value of at
least 18 miles per gallon, except that such term does not
include a category 2 truck;
(3) the term ‘‘category 2 truck’’ means a large van or
a large pickup, as categorized by the Secretary using the
method used by the Environmental Protection Agency and
described in the report entitled ‘‘Light-Duty Automotive Technology
and Fuel Economy Trends: 1975 through 2008’’;
(4) the term ‘‘category 3 truck’’ means a work truck, as
defined in section 32901(a)(19) of title 49, United States Code;
(5) the term ‘‘combined fuel economy value’’ means—
(A) with respect to a new fuel efficient automobile,
the number, expressed in miles per gallon, centered below
the words ‘‘Combined Fuel Economy’’ on the label required
to be affixed or caused to be affixed on a new automobile
pursuant to subpart D of part 600 of title 40, Code of
Federal Regulations;
(B) with respect to an eligible trade-in vehicle, the
equivalent of the number described in subparagraph (A),
and posted under the words ‘‘Estimated New EPA MPG’’
and above the word ‘‘Combined’’ for vehicles of model year
1984 through 2007, or posted under the words ‘‘New EPA
MPG’’ and above the word ‘‘Combined’’ for vehicles of model
year 2008 or later on the fueleconomy.gov website of the
Environmental Protection Agency for the make, model, and
year of such vehicle; or
(C) with respect to an eligible trade-in vehicle manufactured
between model years 1978 through 1985, the equivalent
of the number described in subparagraph (A) as determined
by the Secretary (and posted on the website of
the National Highway Traffic Safety Administration) using
data maintained by the Environmental Protection Agency
for the make, model, and year of such vehicle.
(6) the term ‘‘dealer’’ means a person licensed by a State
who engages in the sale of new automobiles to ultimate purchasers;
(7) the term ‘‘eligible trade-in vehicle’’ means an automobile
or a work truck (as such terms are defined in section 32901(a)
of title 49, United States Code) that, at the time it is presented
for trade-in under this section—
(A) is in drivable condition;
(B) has been continuously insured consistent with the
applicable State law and registered to the same owner
for a period of not less than 1 year immediately prior
to such trade-in;
(C) was manufactured less than 25 years before the
date of the trade-in; and
(D) in the case of an automobile, has a combined fuel
economy value of 18 miles per gallon or less;
(8) the term ‘‘new fuel efficient automobile’’ means an automobile
described in paragraph (1), (2), (3), or (4)—
(A) the equitable or legal title of which has not been
transferred to any person other than the ultimate purchaser;
(B) that carries a manufacturer’s suggested retail price
of $45,000 or less;
(C) that—
(i) in the case of passenger automobiles, category
1 trucks, or category 2 trucks, is certified to applicable
standards under section 86.1811–04 of title 40, Code
of Federal Regulations; or
(ii) in the case of category 3 trucks, is certified
to the applicable vehicle or engine standards under
section 86.1816–08, 86–007–11, or 86.008–10 of title
40, Code of Federal Regulations; and
(D) that has the combined fuel economy value of at
least—
(i) 22 miles per gallon for a passenger automobile;
(ii) 18 miles per gallon for a category 1 truck;
or
(iii) 15 miles per gallon for a category 2 truck;
(9) the term ‘‘Program’’ means the Consumer Assistance
to Recycle and Save Program established by this section;
(10) the term ‘‘qualifying lease’’ means a lease of an automobile
for a period of not less than 5 years;
(11) the term ‘‘scrappage value’’ means the amount received
by the dealer for a vehicle upon transferring title of such
vehicle to the person responsible for ensuring the dismantling
and destroying of the vehicle;
(12) the term ‘‘Secretary’’ means the Secretary of Transportation
acting through the National Highway Traffic Safety
Administration;
(13) the term ‘‘ultimate purchaser’’ means, with respect
to any new automobile, the first person who in good faith
purchases such automobile for purposes other than resale;
(14) the term ‘‘vehicle identification number’’ means the
17 character number used by the automobile industry to identify
individual automobiles; and
(15) the term ‘‘voucher’’ means an electronic transfer of
funds to a dealer based on an eligible transaction under this
program.
(j) APPROPRIATION.—There is hereby appropriated to the Secretary
of Transportation $1,000,000,000, of which up to $50,000,000
is available for administration, to remain available until expended
to carry out this section.