Your Money. Personal Finance. Your Practice. Popular Courses. Taxes Charitable Donations. Table of Contents Expand. What Is Cash for Clunkers? Understanding Cash for Clunkers. Requirements for Cash for Clunkers. Pros and Cons of Cash for Clunkers. Cash for Clunkers FAQs. The Bottom Line. Key Takeaways Cash for Clunkers was a government program that provided financial incentives to car owners to trade in their old, less fuel-efficient vehicles for more fuel-efficient ones.
To qualify for the credit, a traded-in car had to be less than 25 years old, have an EPA-rated fuel efficiency of less than 18 miles per gallon, be in drivable condition, and be scrapped. Supporters argue that the program stimulated the economy and reduced pollution.
Critics of the program say that it created a shortage of used vehicles, increasing used car prices and harming income earners. They also claim that it was heavy on taxpayers and favored foreign manufacturers. Pros Provided stimulus to the economy Replaced fuel-inefficient cars with fuel-efficient ones. Created more hazardous material through metal shredder waste Costly way to reduce carbon emissions.
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Investopedia does not include all offers available in the marketplace. Clunker Definition A clunker is a popular reference to the old vehicle traded in under the U. What Is the Gas Guzzler Tax? The gas guzzler tax is a U. With sales nosediving, several flagship US auto companies were on the brink of ruin. Even in the deepest recession doldrums, Americans proved plenty ready to splash cash on new gas-sippers—provided Uncle Sam pay for some of it.
So popular was the scheme that car buyers blew right through funds the government had expected to last until November The government had to cough up an extra couple of billion dollars to meet demand.
The latest evidence comes from a new paper registration required in the American Economic Journal that deals an extra harsh double-whammy of revisionism. Cash for Clunkers was supposed to do a couple of things. In the process, the US fleet would be left cleaner and more fuel-efficient than if aging gas-guzzlers clunked around for another half-decade. The program did boost short-term spending—but not much. Under the plan, only gas-guzzling clunkers were eligible for the program; the cutoff was cars that got 18 miles per gallon about 7.
Within eight months of the end of the program, there remained no difference in new car ownership between those eligible for Cash for Clunkers and those not. And in fact, the sizable rebate would likely encourage buyers to buy more expensive cars than they otherwise would have—boosting auto industry revenue over the long term. Here's what to know. Should I cut them out of my will?
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