Posted by: David Kiley on April 1, 2009
One proposed Clunker bill, introduced by Rep. Betty Sutton (D-OH) would result in some sensational deals on new cars if some version of the bill gets passed in Congress.
This is a bill that would use tax-payer dollars to add to new-car incentives. The idea is to give people money to buy new cars, stimulate the economy and get older cars with poor emissions performance off the road.
Edmunds.com gave me MSRPs and current incentives on five vehicles that would easily qualify for the federal incentives under the Sutton bill; though I caution that there is committee work being done on the bills in Congress that may not come out as generous as Sutton’s. This is back-of-the-envelope. But it’s pretty close. And it assumes that the car companies would keep up their levels of incentives, though some may be backed off if the government steps in.
The Chevy Malibu: MSRP is $25,510. GM already has incentives taking it down to $20,510. The four cylinder Malibu would qualify for a $5,000 added incentive, while the six-cylinder would qualify for a $4,000 rebate. Take an additional $300 off for the sales tax credit. Final price: $14,700 for a Malibu.
Ford Focus: MSRP is $18,466. Ford’s incentives take it down to $15,200. The Focus would qualify for a $5,000 federal rebate. Sales tax savings would be around $225.00. Final price: about $10,000.
Honda Civic: MSRP is $20,589. Honda’s incentives take it down to $18,417. Add the Federal rebate of $5,000 and the tax credit worth about $275. Final price: About $13,000.
Dodge Ram: The Sutton bill calls for commercial trucks to be bought as long as a nine-year-old or older truck is scrapped. No fuel economy provision for businesses. MSRP on the RAM 1500 Edmunds cites is $39,010. Chrysler’s incentives already take it down to $27,973. The federal rebate would be $5,000, and the tax credit is worth about $400. Final price: $22,500 for a pretty loaded truck.
Toyota Camry: MSRP is $25,037. Toyota already discounts it to $21,338. Add a $5,000 federal rebate for the four-cylinder, or $4,000 for the six cylinder. Tax credit savings is about $300. Final price: About $16,000 for the four cylinder Camry.
The Sutton bill, like others, is structured to get people out of older cars with poorer emissions and fuel economy performance, and into a new, greener car that will stimulate the economy.
Getting out of, say, a 1995 Explorer and into a Malibu, Ford Fusion or even a Focus, is not far fetched. Ford, for example, says the trend has already begun of baby boomers who bought minivans and SUVs in their child rearing ages trading them in for cars. That trend is only going to continue.
Think of young drivers who inherited some of these SUVs and Oldsmobiles from their parents and grandparents. If the clunker bill passes, it’s hard to imagine getting this much vehicle for such a low price again after the money for the bill runs out.
The only alteration to the above numbers I’d make is that you would need to add to your total cost the cost of financing ( if you couldn’t get zero-percent) and the value of your trade in. As the car will be scrapped, there is no trade in value.
So, some people may take themselves out of the process. My 2000 Subaru Legacy, for example, is worth about $4,000 if I sell it. I lose that if I treat as a clunker. But the person who has, or can scare up a 1993 Explorer with 200,000 miles on it or a 1993 Olds Cutlass Ciera with 180,000 miles on it is in a lot better shape. Or take my friend Darlene who has a 1988 Jeep Cherokee whose engine parts are deteriorating from the ethanol levels in today’s gasoline. Her car is worth zip, except to her.
Given the fact that the auto industry is selling at a rate of 9.7 million a year, and the “real” demand is more like 13.5 million but for the Recession, it’s hard to believe that deals like these wouldn’t drag a million additional buyers off the sidelines.
(Follow me on Twitter: @davidkiley)