Senator Dick Durbin Discusses Cash for Clunkers, Legislation that Will Help Stimulate Car Sales

June 1, 2009 -- CARBONDALE, IL – Consumers will receive vouchers from the federal government to help purchase new, more fuel-efficient cars and older cars that damage the environment will be taken off the roads if legislation to establish the “Cash for Clunkers” program is approved by Congress, U.S. Senator Dick Durbin (D-IL) said today. While discussing this effort to stimulate new car sales, Durbin promoted the tax credits made available through the American Recovery and Reinvestment Act for first-time home buyers.

“At a time when the future of the auto industry is uncertain and sales are lagging, a program that will bring people back into dealerships and stimulate auto sales is badly needed,” said Durbin. “The ‘Cash for Clunkers’ program will not only give consumers an incentive to buy new cars, but will also encourage them to choose more fuel-efficient vehicles. Both our economy and the environment will benefit in the long run from taking these older, inefficient cars off the road.”

The “Cash for Clunkers” measure, also known as the Drive America Forward Act, of which Durbin is a cosponsor, provides up to a $4,500 voucher to purchase or take a qualified lease on a new, more fuel-efficient car or truck for trading in an older vehicle to be scrapped. Consumers receive a $3,500 voucher if the new car is at least 4 miles per gallon (mpg) higher than the old car. The value of the voucher climbs to $4,500 if the new car is 10 mpg higher. Different fuel economy requirements are used for eligible new SUVs and trucks.

New passenger cars must have a fuel economy of at least 22 mpg and have a retail price less than $45,000. Trade-in vehicles must have a fuel economy less than 18 mpg,—except for work trucks—be in drivable condition and have been insured and registered to the same owner for a year.

A similar program was launched in Germany in February with good results. In March alone, Germany’s car sales jumped 40 percent relative to March 2008. From January to April of 2009, sales were up 18 percent from the same time period a year earlier.

Sales of domestically produced light cars and trucks have fallen 34 percent from this time in 2008. Imported cars and light trucks are actually faring worse, down 37 percent. Chrysler sales plummeted 55 percent from April 2008 to 2009. GM sales dropped 53 percent from last year and Ford is down 48 percent.

Durbin also discussed the tax credit for first time home buyers included in the Recovery Act. The tax credit is aimed at helping American families purchase their own homes and at stimulating home sales. Drawing on $2.6 billion in Recovery Act funding, this initiative means that single adults making up to $75,000 and married couples filing jointly making up to $150,000 are eligible for up to an $8,000 tax credit.

“One in every two homes sold in 2008 was to a first-time home buyer. Under this program, first-time home buyers could have 10 percent of the purchase price up to $8,000 refunded as a tax credit,” said Durbin.

Although the same tax credit for homes purchased in 2008 required repayment at no interest over 15 years, the tax credit for homes purchased in 2009 does not have to be paid back.

In order to prevent abuse, the program stipulates that homes cannot be purchased from relatives, they cannot be re-sold for three years, and the homes must be primary residences—no second or vacation homes.

Source: Senator Dick Durbin