Apr 16, 2009

Be Wary of 'Cash for Clunkers'

One idea proposed to help the endangered U.S. car companies is a vehicle “scrappage” program that would incentivize the crushing of old cars. But it’s an initiative that could have unwanted ramifications. In a letter to President Barack Obama, the Specialty Equipment Market Association (SEMA) again expressed its opposition to such a program, just as it did in February when Congress expressly rejected vehicle scrappage as it passed the economic stimulus bill.

“SEMA has consistently warned against wasting taxpayer dollars on a program that may produce an artificial spike in sales but does not reduce emissions or increase fuel efficiency. We encourage you to help the entire auto industry with programs that focus the incentive where it counts -- on the purchase of new vehicles and not destroying older cars,” wrote Chris Kersting, SEMA's president and CEO.

In the letter to the president, SEMA discussed the need to help consumers, automakers and dealerships with a program to stimulate new car sales. The association supports the administration's plan to assist consumers with government-issued vouchers toward the purchase of fuel-efficient new vehicles. In addition, SEMA urges the government to allow consumers to deduct the car interest payments on their taxes. But the SEMA head suggested that scrappage programs actually harm the environment.

“While supporters tout a similar German program as evidence of success, the European Federation for Transport and the Environment has urged Germany and other countries to abandon scrappage subsidies because they do more environmental harm than good by artificially accelerating the car life cycle,” he said.

Under the proposed scrappage program, millions of consumers who may be eager and able to purchase a new car but don't have an eligible older car to trade in would be denied access to the proposed incentive vouchers, while someone who owns just one older car could qualify for the voucher but is not likely to purchase a new car. However, people who own two or three cars may take advantage of the taxpayer giveaway. Many of these older cars are infrequently driven, so destroying them will not clean the nation's air or make us less dependent on foreign oil, though it might improve the look of a few front yards.

“Cash for Clunkers will hurt thousands of Americans working for independent repair, restoration and customization shops across the country while reducing the number of vehicles available for low-income individuals and driving up the cost of the remaining used cars and parts,” said Kersting. “It is time to help the entire auto industry by creating incentives for all that will increase vehicle sales. Leave the valuable and affordable older cars available to those who need and appreciate them.”