Automakers struggling to lure prospective car shoppers in the depressed U.S. market received a helping hand from the US government Monday. The Department of Transportation's Car Allowance Rebate System or CARS made its official debut in Washington. Starting Monday, car buyers wishing to trade in their older vehicles for a newer model could qualify for cash rebates of up to $4,500.
American consumers wishing to trade their old gas guzzlers for newer, more fuel efficient vehicles now have one more reason to buy.
Ohio Congresswoman Betty Sutton says the Car Allowance Rebate System, or "Cash for Clunkers" as it's better known, is a "win-win" for car buyers and the U.S. economy. "By any name it's a good deal," she said. "It's a good deal for the American people, it's a good deal for our country."
The idea is simple. The government will give consumers up to $4,500 to trade in their older vehicles. The only catch - the car must be less than 25 years old and get less than eight kilometers per liter.
U.S. car dealers are excited. Jay Malone is sales director at Brown Automotive Group in North Carolina. "It is definitely going to stimulate business, there's no question about that and the customers on the other side of the coin are really getting a good deal," Brown said.
Cindy Wasserman said it didn't take long for her family to decide it was time to get rid of her son's old car. "We made a decision within, really almost 12 hours," she said.
Michigan Senator Carl Levin, whose state has been hit hard by plunging auto sales, expects the rebate program will have a positive impact on U.S. auto sales.
Similar programs in Europe are projected to result in half a million more new cars sold this year.
"This experiment has worked well in other countries, including Germany where new car sales in June were up 40 percent from the previous June. So there is a precedent for this in other countries," Levin said. "We have experience in other countries that proves that it works."
But in the U.S., where automakers are on pace to sell 10 million new cars this year, industry analyst Jeremy Anwyl says an additional half a million in car sales will barely make a dent. "It's certainly a step in the right direction," he says "but by no means is the car business back on its feet."
Still, car dealer Rick De Silva says public interest alone is already driving new customers into his lot. "There's no doubt about it. Just the increase in floor traffic in itself translates into at least a 20 percent increase in sales," De Silva said.
For large car owner Berlin Allen, the deal was too good to pass up. "I could keep driving it but as long as Mr. Obama wants to give me $4,500 for it, then I would be strongly influenced by that," he said.
The CARS program is expected to end November 1, or when the billion dollar funding from the Federal Government runs out.