Marketplace: Cash for clunkers may stall

Julia Anderson

It has occurred to me that my 1994 Toyota 4Runner with 218,000 miles and a lot of Idaho back roads on its odometer might be a perfect trade-in under the new federal "cash for clunkers" deal.

The program — officially the Consumer Assistance Recycle and Save Act of 2009 — provides credit of up to $4,500 to help buyers lower the cost of a new car purchase or lease. Things are expected to get rolling in July and continue through November.

Cash for clunkers will cost American taxpayers $1 billion, but its supporters say the expenditure will be worth it for the jobs saved by boosting new car sales by at least 250,000 vehicles this year. And at the same time, the program gets us out of older gas-guzzlers and into more fuel-efficient vehicles. Here's how it works:

— Buyers who trade in an older vehicle and buy a new one get credit of either $3,500 or $4,500.

— The trade-in vehicle must be no older than 25 years, have average gas mileage of 18 miles or less per gallon, and have been owned and insured by the seller for at least a year.

— The new vehicle must cost less than $45,000 and get more than 22 mpg. To get the higher credit, the new vehicle must average 10 more miles per gallon than the old one.

— The rules are different for trucks and SUVs, pickups and minivans. An improvement of at least 2 mpg between the old and new vehicles qualifies for $3,500; 5 mpg or more entitles buyers to $4,500.

— You don't need a voucher; dealers will apply a credit at the time of purchase.

— The new vehicle can be foreign or domestic.

— The government credit doesn't come as an addition to trade-in values because cars brought in under the cash-for-clunkers program have to be scrapped, so their trade-in value is essentially zero.

A government Web site at www.cars.gov/ provides a Q&A for car buyers.

At cars.gov, I determined that the estimated average fuel efficiency of my 4Runner was 13 mpg. (Worse than I thought). I've owned and insured this vehicle for 12 years and really want a newer four-wheel-drive pickup, so I can haul hay.

I qualify!

But here's my dilemma: I'm real sure I don't want a car payment in these times of financial insecurity. And a new car purchase for cash has been out of my reach for years.

That's exactly what critics of the cash for clunkers program say. "It would be a stretch to believe that anyone driving around in a car that's worth less than $4,500 can suddenly — in the middle of the Great Recession — afford a new car," said Business Insider's Jay Yarrow. "There's a reason they're driving around in a clunker, and no $4,500 discount is really going to do much to change that."

So, unfortunately, the cash for clunkers deal isn't likely going to be enough to get me out of the frozen-with-fear mode and into a shiny new pickup.

Americans are on track to buy only 9.5 million new vehicles this year, down 40 percent from 16.1 million in 2007. Experts say that U.S. auto sales need to increase by at least 3 million vehicles or more, not the 250,000 to 400,000 that the government is willing to pay for with the clunkers program. Hey, it's only a billion.

Julia Anderson is The Columbian's business editor. Reach her at 360-735-4509 or julia.anderson@columbian.com.