Clunkers program generates cash for old cars

The Cash for Clunkers program has hit the ground driving.

Jennifer Shelby, president of Shelby Motors in Champaign, said the program has generated a lot of business for her dealership since it began July 24.

“I think they like it,” Shelby said. “Everyone we talked to loves the program, but the people who didn’t jump in and do it right away are having trouble finding cars that still qualify for the program.”

According to, a car must be less than 25 years old, must get less than 18 miles per gallon, must be in working condition, must be manufactured before 2001 and needs to have been insured over the last 12 months to be a clunker.

If the car qualifies, the customer receives an instant rebate of either $3,500 or $4,500 to be used on the new car purchase of their choice. Shelby said inventory has dropped quickly and her dealership can no longer provide all customers with the cars they had planned to trade in for.

Craig Andrea, general manager of the Grossinger Autoplex in Lincolnwood, Ill., said he has experienced similar results from the program at his dealership.

“The program has done incredible — over 250 people bought new cars,” Andrea said. “The consumers are buying cars they can afford, and people are out there taking value when it’s there. They love it.”

Anil Bera, professor of economics, said the program could have been better executed if certain aspects were planned more thoroughly.

“They (the government) could have spent more time thinking about it,” Bera said. “There’s a huge demand for the new cars, and it should satisfy the consumer. Looking at the reports, the rules and regulations make it hard to understand the whole system.”

Despite some of its complex rules, professor of economics Fred Giertz said he thinks Cash for Clunkers will have a small lasting effect on the economy.

“Cash for Clunkers is one aspect of helping the economy,” Giertz said. “Right now, we’re spending more than we’re taking in, and we’re in situations where we are spending huge amounts of money.”

Bera said the program also has some downsides in that it will cause the market prices for used cars to increase, making it even more difficult for low-income people to afford a new car.

After a car has been traded in, the engine is disabled and sent to a recycling facility nearby where the car is scrapped for parts, Shelby said. Although this is good for the environment, Bera said it may be harder to find spare car parts because various companies recycle the parts from cars traded in through the program.

The Cash for Clunkers program ends in September, and so far, dealerships around Chicago, Champaign and other cities in the U.S. are encouraged by its results.

“The spending habits of the consumers that are out there are finding the value prices.” Andrea said. “More frugal consumers are stimulating the economy and that’s a really nice thing to see.”