By Ken Thomas
WASHINGTON (AP) — Car shoppers may have a good reason to trade in their old jalopy for something that gets better gas mileage.
Congress is developing "cash for clunkers" legislation that would provide vouchers to consumers who trade in their gas guzzlers and buy more fuel-efficient vehicles. Modeled after successful programs in Europe, the bills are designed to get more gas-sipping cars on the road and boost auto sales, which dropped more than 40 percent among the Big Three carmakers in March.
Senate Majority Leader Harry Reid, D-Nev., and House Speaker Nancy Pelosi, D-Calif., have signaled support for some type of car scrappage program and lawmakers are trying to develop a compromise that could win approval in both chambers.
"It will jump-start the demand for new cars, helping our auto industries," said Sen. Charles Schumer, D-N.Y. "And most importantly help families trade in expensive, low miles per gallon vehicles for cheaper fuel efficient vehicles."
With General Motors Corp. and Chrysler LLC surviving on billions in government aid and few takers at car dealerships, lawmakers have been trying to develop incentives to help the auto industry and respond to environmental groups that want better fuel efficiency in the vehicle fleet.
President Barack Obama gave momentum to a "cash-for-clunker" program on Monday, urging Congress to use part of the economic stimulus package to give consumers a "generous credit" when they trade in their older car for something more fuel-efficient.
Analysts have estimated it could boost car sales by 750,000 to 1 million vehicles a year. In Germany, a similar program has been credited with increasing auto sales by more than 20 percent.
In the Senate, Sens. Dianne Feinstein, D-Calif., Susan Collins, R-Maine, and Schumer want to give consumers a voucher for $2,500 to $4,500 to buy a new vehicle with better fuel efficiency. The older vehicle eligible for scrapping would need to get less than 18 miles per gallon.
The Senate version, which would apply to automobiles built around the globe, would also provide vouchers of up to $3,000 for used vehicles or credits of up to $3,000 for transit fares. In a letter to Obama, the senators suggested funding for the $2 billion to $4 billion program could be drawn from the economic stimulus package.
In the House, Rep. Betty Sutton, D-Ohio, wants to give car shoppers $3,000 to $5,000 when they turn in a vehicle for something more efficient. The program would be limited to cars built in North America and require the new car to get at least 27 miles per gallon.
"We need to get people into showrooms to buy an automobile. It's that simple," said Rep. Candice Miller, R-Mich., who has worked with Sutton on the plan.
The United Auto Workers union has supported Sutton's approach, noting it would "help to protect or create thousands of jobs for American workers."
But trade groups representing foreign automakers and their dealers want the incentives to apply more broadly. Gas-electric hybrids such as the Toyota Prius and the Honda Civic hybrid are built in Japan and would be ineligible under the House version.
"Cash for clunkers makes the most sense when it is applied to all vehicle brands sold in the United States," said Russ Darrow, a Wisconsin car dealer who is chairman of the American International Automobile Dealers Association.
Associated Press writer Kimberly Hefling contributed to this report.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
—For more ways to save, spend, invest and borrow, visit MainStreet.com.