The approval came as part of a larger $106 billion wartime spending proposal - out of this amount, just $1 billion was set aside for the Cash for Clunkers program, or less than 1%. In reality, the full cost of the program is expected to be around $4 billion, but the $1 billion allocated should be enough to run the program until the end of September this year, reports The Detroit News.
The stipulations in the program are largely the same as that being proposed when the program was first scrapped in the U.S. Senate for giving Detroit too much of an advantage over foreign car manufacturers with local production facilities. The recently agreed upon scheme carries on the same proposal for vouchers of up to $4,500 for new car buyers who exchange gas-guzzlers for gas-sippers.
The new program will only affect owners of old cars that cannot achieve above 18mpg in their combined cycles. If these owners swap their cars for a new car that is at least 4mpg more efficient, they will be eligible to receive a $3,500 voucher from the government. The full $4,500 is only available to those who improve their gas mileage figures by 10mpg or more.
Trucks use a different system, where the new truck that is being purchased must achieve at least 18mpg and also be 2mpg more efficient than their current vehicle. This would garner owners the $3,500 voucher, while those improving their mileage by 5mpg would get the full $4,500.
Combined with new tax breaks from the government that eliminate local and state taxes, the government is significantly absorbing the costs of new cars to keep the auto industry viable through the recession.