Cash for Clunkers is an initiative introduced by the U.S Government, in which financial incentives were provided to the car owners to scrap their less efficient vehicles that were old and buy new vehicles that are more fuel efficient. Though originally it was introduced as Car Allowance Rebate System and later became popular as Cash for Clunkers program.
Concept of Cash for Clunkers
President Obama signed the law of Cash for Clunkers in the year 2009. The law was also administered by the National Highway Traffic Safety Administration. All required information were submitted by the car dealers to NHTSA on behalf of qualified new car buyers. Though there are some key factors that were considered before allotting the policy to a car owners. The factors are listed below for reference –
- Cash for Clunkers was introduced by U.S government so that car owners can get their old in-efficient vehicles exchanged with new efficient vehicles.
- The program got depleted and ended in November 2009 after allocating $3 billion.
- The needs to qualify the credit by fulfilling certain criteria. The traded-in car should be less than 25 years old, should be in a diveable condition, haven an EPD-rated fuel efficiency, and be scrapped.
- There were arguments from the supporters that the program has caused stimulation in the economy and pollution was reduced.
- The critics objected that the program has resulted in a shortage of vehicles, used car prices were increased and income earners were harmed. They added that the program was heavy for taxpayers.
Criteria to qualify for the program
The program began in 2009 in July. Few criteria were listed and they had to be met by the traded-in used car.
- Must be in drivable condition.
- Have an EPA- rated fuel efficiency that is almost less than 18 miles per gallon.
- Be scrapped in the sense that the engine is rendered unusable and the body of the vehicle is crushed.
- The new car bought in exchange for the old one should have an EPA-rated fuel efficiency of more than 22 miles per gallon.
These were the rules for old cars. However, the rules for trucks were more complicated.
Effects of Cash for Clunker
There were mixed results obtained from the program. It has a lot of supporters and various critics as well. Supporters stated that the program was effective and it was a success. They said that the program has effectively removed more than 7,00,000 fuel-inefficient cars from the roads. However, there were numerou critics of the program of the program. It was criticized by economists, environmental groups and Federal government agencies. finally , The National Bureau of Economic Research Stated that there were modest effects of the program and most of the transactions that were carried out could have happened anyway.
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