Environmentalists and even some Democratic U.S. Senators have criticized the cash for clunkers legislation that President Obama is expected to sign as “Handouts for Hummers.”
They say the bill doesn’t set high enough fuel economy targets especially for SUVs. Cars have to get at least 22 mpg and 4 mpg better than the vehicles traded in, to be eligible for a $3,500 voucher. Light trucks and SUVs only have to get 18 mpg and 2 mpg better than the vehicle traded in to be scrapped. Full-sized SUVs only have to get 15 mpg, or an improvement of 1 mpg.
While those improved numbers may not sound like a lot, small mpg improvements can mean significant savings at the pump. Small mileage improvements to very inefficient cars yield bigger savings than similar mileage improvements to more efficient cars. To illustrate the point, the chart below lists five potential trades that would earn vouchers under the Cash for Clunkers program, and the amount of fuel and cash each would save. (We assume the cars are driven the national average of 12,000 miles per year. Mpg ratings are EPA-sourced combined averages, as the law specifies. And gasoline is $2.70 a gallon.)
We list five trade-ins from our “clunkers to junk” list and five Consumer Reports recommend cars that could replace them. Four of the cars get 5 mpg better than the car they are replacing; one gets 10 mpg better. The three light-trucks that achieve a 5 mpg improvement will get vouchers worth $4,500, while the car will get only a $3,500 voucher. The car trade that nets a 10 mpg improvement would earn a $4,500 voucher.
As the chart illustrates, if you own the new car for five years, the gas savings over the clunker can nearly double the dollars in your pocket when you add it to the amount of your voucher.
|Trade-in||mpg||Purchase||mpg||Gallons saved per year||Money saved per year||Voucher|
|1993 Dodge Ram (4wd)||12||Chevrolet Silverado (V6, 2wd)||17||294||$794.12||$4,500|
|1998 Nissan Pathfinder (4wd)||15||Nissan Murano (AWD)||20||200||$540.00||$4,500|
|1996 Chevrolet Astro||16||Ford Escape (4-cyl., AWD)||21||179||$482.14||$4,500|
|1998 Olds Aurora||18||Volvo C30||23||145||$391.30||$3,500|
|1998 Mercury Grand Marquis||18||Hyundai Elantra||28||238||$642.86||$4,500|