Along with the news of deep federal intervention into the automaking industry, President Obama mentioned three government incentives Monday designed to motivate Americans to buy American autos.
One, a tax break for certain new-car buyers, was part of Obama's economic stimulus package. Another, a federal backing of warranties from GMC and Chrysler, began yesterday. The third, a "cash for clunkers" trade-in program toward new, more efficient vehicles, needs Congressional approval.
A breakdown of the three:
Buy a car, deduct some taxes
The recent stimulus package allows most car buyers to deduct state and local sales and excise taxes on a new car purchases. The deduction applies to taxes paid on the first $49,500 of a vehicle purchase, domestic or foreign.
Some caveats: The tax break isn't immediate; you pay the sales and excise taxes when you make your purchase, then deduct them later when you file your 2010 return. Also, the benefit starts decreasing for individuals who make more than $135,000 in adjusted gross income - $250,000 for joint filers.
The deduction is good on cars purchased between Feb. 17, 2009 and Jan. 1, 2010.
No-worry warranties
To calm concerns about buying a car from an automaker that might not be here a year from now, the Treasury Department has created a new program in which warranties for GM and Chrysler vehicles will be covered if GM and Chrysler aren't around to cover them.
The program creates an account funded by manufacturers and the government that would honor the warranties in the event of a Chapter 11 filing, which seems a good possibility given Obama's hint Monday that it's a legitimate option for carmakers.
Cash for clunkers
Obama expressed support for this interesting incentive, which didn't make it into the stimulus package. A handful of Senate and House proposals need to be sifted before a final plan emerges. Given Obama's verbal signal, that likely will happen soon.
Depending on the legislation, the program would offer $3,000 to $7,000 cash for your trade-in vehicle, as long as that vehicle is 8 years old or getting worse than 18 miles per gallon. Any one of those numbers could change as legislators shape the bill, but it probably will include most or all foreign or American cars.
A similar incentive program helped motivate buyers in Europe. The idea here is the same with all three programs - to help not only struggling automakers, but all the ancillary businesses that are tied to the industry's success.
Tell us what you think. Are you more motivated to buy?
Your Morning Edge:
There aren't many precedents for the government control that Obama announced yesterday over GM and Chrysler, the New York Times reports.
An auto worry: Obama's intentions were good, but such corporate welfare rarely works, writes NYT's David Brooks.
The Wall Street Journal's Gerald Seib says Obama is trying to find the space between opposition to bailouts and desire to stop significant loss of manufacturing jobs.
Posts
34 comments:
I like the idea but, how can you prove that your car is getting less than 18 mpg or what does that mean for the classic car industry....because let's face it, they just don't make cars like they use to back then.
What good is all this when you've lost your job and can't pay the monthly payment and since you lost your job and home your credit score will not allow you to purchase. Once again, all this is aimed at people who are/were able to hang on - what about us people who have lost everything, have paid bills late and have a poor credit score. We're the majority - what is in it for us?
Since alot of cars are "made in America" what is the determining factor to being an "American Car?" Toyota, BMW, Volkswagon, Mercedes and others are built in the US are these not "made in America?"
I hope my next car does not turn out to be a USOMC (United States of Obama Motor Company) 4 door sedan for the peoples model #999. Complete with one way satellite tracking device, and monthly carbon foot print tax stipend, automatically drafted of course.
These folks up in Washington need to take a time out and go sit in the corner, and read up on all the OTHER great countries that have practiced their intended doctrine of "governing for the masses by the few". It has worked so well in the past.
We should retroactively tax him 1 trillion dollars for every cigarette he's puffed on since elected.
sounds like the first shot has been fired in the war on free market economy
I have a better idea, each of the big three need to come up with a no-frills, low cost, basic car or light truck to sell for less than $10,000. Institute the trade in for clunkers program (doesn't have to be $7000, under this program $2500 would work) and get the older, high mileage, fume spouting beasts off the road. Because of the credit crunch and the way it has destroyed many credit ratings, institute an affordable payroll deduction for the remaining balance, if the puchaser looses his job it still comes out of unemployement benefits. If it gets to a point that the purchaser runs out of unemployment benefits, or at any point during unemployement the purchaser can voluntarily return the vehicle with no credit penalty to a designated facility where it could be sold for the balance or another person could buy it for the same arraingement as the first. Before you scoff and dismiss this, think about it. Currently thousands of repossed vehicles are bought and sold each year, the difference between the dealer sticker price and repo auction price is staggering. This is an area that needs to be addressed.
I agree with incentive number one. As for incentive number two, the government has no business guaranteeing warranties on cars. I understand the point of this but this is one more example of government intervention at the expense of taxpayers. Incentive nuumber three is also a joke. Who is going to pay for all of this? Once again, the taxpayers. This incentive will also cause a flood of low MPG used vehicles to hit dealer lots. That will only depress the car values of current low MPG vehicles. That will hurt the people who own them even worse. Next thing you know, we'll be told by the government we'll give you two choices on a new car: a black Prius or a red Prius. No thank you!
wow...i drive a clunker (that runs fine) and that would be all the incentive i need to trade it in. i hope that passes!
$3-7000 for my '01 Chevy? I'm ready to deal, right now!
So let me get this straight. If I trade in my reliable foreign car, I'll get added cash so I can buy a brand new American clunker. What's the catch?
Why is everything this president does eliminate those who make over a certain amount. So I am rewarding for making less. This country was founded on doing the best you can. There is a new mid-class in this country.
Great now tax payers get to buy American's new cars to go along with their new house. The whole thing is a farce. Nothing more than a shell game. We talk and talk about sustainability for the environment, "green building" what about a sustainable economy? Somewhere along the way, the world has forgotten that a real economy produces, not creates. You produce cars to buyers who have been produced by prosperity. You do not produce cars for government created buyers. It is a dangerous line to walk. We jumped on the tight rope a long time ago. Now we are in the middle about to fall. We are not close enough to jump to one side or another. Either we catch our balance and walk the fine line back or we fall.
clearly some people can't read...you can trade in an american or foreign car. the way to determine mpg is to 1)test drive it or 2)look up the epa estimates that have been recorded for the past 20 years. it will probably have some flexibility around it. stop complaining about free money and incentives...if it doesnt apply to you then accept the fact that there are 300mm other people in this country and move on. people just love to whine!
Anonymous complaining about noting being able to finance because of not paying bills here is an idea for you. ONLY BUY WHAT YOU CAN AFFORD!! I know it is a idea foreign to many people, but why should those of us that have been fiscally responsible pay for you that have been living beyond your means. People knew they could not afford a $300k house and a $65k car on $45k a year, but they did it, now I should pay for people that did that? No way. Learn to take responsibility for your actions, you dug that hole you are in, I just hope you learned from it, but I doubt you did, you just want to know when you are going to get yours? You have been getting yours for years while us fiscally responsible people have done without, so now its our turn.
"what about us people who have lost everything, have paid bills late and have a poor credit score. We're the majority - what is in it for us?"
The majority of people have not lost everything nor are they unemployed. The unemployment rate is about 8%. That is a small minority.
Fiscal prudence is the key. I lost my job, and thanks to fiscal prudence, we're hanging in OK. I also realize the solution is not handouts, but doing whatever you can to better yourself in order to rejoin the workforce.
Handouts to those who have proven to mismanage money will do us no good.
nothing but UAW payoffs, to keep these crooks afloat.
Toyota and other 'foreign' cars are made in America without the UAW stealing from them AND they produce a better product.
the last thing I want is a car by the Govt., what an absolute disaster Obama is
They need to call Obama the black Santa Claus. He needs to gain 200 lbs grow a big white beard and put on a red suit with his big bag of freebies he is handing out by the trillions.
Right now he is secretly handing out mega billions to lying irresponsible homeowners to help them pay their house payments or maybe even buying them free homes like the other Santa Bush did in New Oleans. And of course hes continuing the giveaway to irresponsible corps and chastizing the top brass while saying nothing about the homeowner liars he is helping out. Lets make sure we divert attention to the top corp heads and grill them while excluding the liars who dont pay their bills.
It sounds like now Santa Obama is also now going to give out new cars freebies to go with the free homes. Wow what a great prez. Its Xmas year round.
Of course all this extra spending of untold trillions piling up what may be a quadrillion in debt along side of Bushes screwups, is going to "get us out of this crisis and be a stronger nation ..." blah blah blah ... Look dude just cut the happy talk jive and how "we will defeat the terrorists... " blah blah blah ... This is also redundant Bush crapola.
Everyone needs to take note of the "quadrillion" because this is going to be the next big number since "trillion" will be obselete or too small.
Yes, Obama was left this mess but this is what he wanted so no sympathy here and he is compounding the debt mess with no let up on spending while nobody seems to be object who voted for him.
Still this Obama presidency looks a lot like the 3rd term of Bush who still cant find a publisher for his memoirs and library funding at SMU but we are sure Daddy will fix him up as usual and get his billionaire pals to lend a hand.
Not one intelligent comment in the bunch. Now go get a job, pay your bills and quit whining. And next time one of you know it alls can run for President.....
I have 2 cars over 8 years old, a Mazda and a Mercury.
My wife and I were discussing trying to hang on to them for another two years since we know we won't get much on trade-in and maintenance hasn't yet reached replacement costs.
Basically, we're just running them until they need an expensive repair.
We have a third vehicle which is basically new, so don't really worry about the inconvenience of a breakdown.
But, we'd take $3K for either of the older cars now.
The problem is what happens to those cars when traded in.
Are they scrapped?
That may be the best option, otherwise they will still be on the road (perhaps in Mexico, but still polluting or guzzling).
Is anyone else scared to death of this. I mean if you told me 6 months ago that the new president of the US was going to fire the CEO of GM I would have responded... Are you crazy! The US is not a communist state. That is where we are heading people. It is time to wake the @%#$ up. The amount of power that this guy is grabbing is unbelievable. Our founding fathers are rolling over in there graves.
The incentives to stimulate people to buy cars might actually work. This is the first real "stimulus" plan I've seen.
Removing the inentives for higher income workers is a mistake though. They might be the only ones in a position to buy new cars.
Anonymous 8:32am must be smoking crack! If you are drowning in bills and don't have job, then you're in no position to buy a new car so don't. This plan isn't aimed at you. The extra unemployment dollars might help you float for a while until you can get a job.
10:41- get real. So you think that if a company that has been run so poorly it needs $25B from the government, the CEO should stay? The administration can fire him because the administration is keeping the company alive (maybe you missed that point). Check out the WSJ...great article about it.
or perhaps you wanted another bailout for GM? no, you just like to complain either way. firing a horrible ceo to set up chapter 11 is a great solution, and complaining doesn't mask the fact that you have no solutions of your own
the solution was to never give the money in the first place and let them go into chapter 11 at that time. We all knew that it was going to happen eventually. And yes the CEO should have been fired, but not by the president. Market forces would have eventually done this. This is a FREE MARKET.
Obama is like a kid in a candy store a shopaholic with a credit card or a drunk in a wine celler. Is he trying to immitate Bush? Dont forget Bush was born in the lap of luxury and privlege and got it all paid for or fixed up but Obama was raised 180 degree the opposite not a smirking rich spoiled rotten brat.
When it comes time to pay to the piper and reality sets in where is the money coming from to pay the bills? Pass it on to the next guy? Spend like theres no tommorrow or a drunken sailor.
All this dare to dream or eyes on the prize crapola from the BHO crowd is just that a dream myth fairytale joke. Are they dreaming in places like 3rd world Africa trying to scavage a small crumb to eat to live another day? please .... some idiots make others hurl puke and gag.
If Obama and all the Liberals want to start a revolution, this is how to start one.
Would you buy a car from a politician?
I need a JOB not a CAR.
Why February 17th? Figures... I bought my truck on February 14th. Can't catch a break.
"10:41- get real. So you think that if a company that has been run so poorly it needs $25B from the government, the CEO should stay? The administration can fire him because the administration is keeping the company alive (maybe you missed that point). Check out the WSJ...great article about it.
or perhaps you wanted another bailout for GM? no, you just like to complain either way. firing a horrible ceo to set up chapter 11 is a great solution, and complaining doesn't mask the fact that you have no solutions of your own"
The solution is to allow these companies to take bankruptcy, get out from under the outrageous union contracts, and start over. It's the UNIONS that Obama is protecting, NOT the auto industry. And he's using billions of our tax dollars to do it.
uh, becky...that is the plan. if they dont meet their targets, they go into bankruptcy and the union workers and creditors have to deal with their losses. if obama wanted to protect the unions, he would just throw more money at them, like bush, and give them more time to operate. but he's not giving them more money. maybe you missed that. sounds like you're missing a lot of facts. like i said, check out the wall street journal...unless that is too high level for you?
They should have gone to bankruptcy court long ago, before billions of dollars went into the pit. But Obama had to give them a chance to offer huge buyouts to union workers who agreed to quit for a hundred thousand dollars and a free car. Face it, if auto workers got paid what they were worth (like the non-unionized companies such as Honda), and not what the unions negotiated, these companies would not be in this mess. but the unions raised millions for Obama and he had to pay them back.
http://www.youtube.com/watch?v=P36x8rTb3jI
Funny how there are mainly two sides to this days post those blindly seeking the means to exercise said Obama plan, and those who can see past tomorrow and wonder how it will be paid for??????? and by whom???????
and why?????
Want a different perspective from another countries eyes on where we are headed? You Tube search Daniel Hannan and crack an ice cold root beer to sit back enjoy the truth of what are about to face.
And then there is Becky who nailed it about the unions, so true. They should be abolished.
I think the tax deductions and warranties are quite reasonable, given the situation we're in and the options at hand. I'm in favor of "cash for gas guzzlers" rather than "cash for clunkers". Provide the rebates to improve fuel efficiency when you trade in for any car that gets significantly better mileage. And, raise the money to pay for it by imposing a carbon tax on all new cars and light trucks that don't meet current fuel standards.
We are screwed???????????
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