Cash for clunkers

The US government is following Europe's lead and will offer its citizens tax-funded, new car vouchers in a scrappage scheme. Like the initiatives in the UK and Europe the incentive is aimed at kick-starting car sales by having people scrap their old vehicles and replace them with new vehicles. Dubbed 'cash for clunkers' in the US, the scheme has divided opinion among politicians and industry commentators, many of whom think that using tax dollars to stimulate the market is short-sighted, while environmentalists claim the criteria is not tough enough.

Unlike the age-based UK scheme US consumers will be offered incentives based on the fuel economy of their vehicles. Owners of cars with a consumption figure of 18mpg or less will receive a $3,500 (£2,138) voucher if they trade it in for a vehicle bettering 22mpg. Should the difference in mpg figures be greater than 10mpg between the old and new vehicle the voucher value swells to $4,500 - £2,750.

The voucher remains valid for a year and are also applied to America's large pickup, SUV and minivan (MPV) buying population, though the mpg differentials are closer. Buyers trading in their vehicle with an 18mpg or worse figure will get a $3,500 voucher if their new vehicle is 2mpg better, or $4,500 if it's 5mpg better.

The vehicles will be 'recycled', with the title transferred and penalties of up to $15,000 for those trying to use a voucher and resell their old vehicle. The Bill for the cash for clunkers proposals has passed through the US House of Representatives this week with a majority yes vote of 298 beating 119 nos. President Barack Obama and the Democrats have been pushing the directive hard in the hope it brings the same spike in car sales witnessed both in the UK and throughout Europe.

Kyle Fortune