Uncle Sam isn't just bailing out the automakers by loaning them cash. He's doing his best to bail them out by talking you into a new car. Proposals making their way through Congress now would make it easier for Americans to buy new cars and pay them to get rid of old ones.
CNN Money reports, "Several ideas are on the table, but two of them are really making the industry pay attention. One plan is to make new car costs tax deductible. The other is to give rebates to Americans with old cars so they can better afford to buy new ones, a program otherwise known as ‘cash for clunkers.'"
Kicking Tires reports, "Maryland Senator Barbara Mikulski (D) wants to give every new-car buyer an additional $1,500 tax break."
The measure, according to CNN, would provide, "An ‘above the line' deduction, meaning even tax filers who don't itemize deductions could still get the benefit." It would apply to new auto loans up to $49,500, but even those buying more expensive cars would get some benefit. The measure would allow them "to deduct the interest and sales tax for the first $49,500. The benefit wouldn't apply to individuals making more than $150,000 or families making more than $250,000."
The "Cash for Clunkers" proposal, according to Motor Trend, "would put thousands of dollars of cash on the hood of fuel efficient cars in exchange for gas guzzlers that would get sent to the scrapper." Car dealers "would have to provide proof that the car being traded in was scrapped and not resold, with the vehicle's VIN being tracked to make sure it does not get registered again."
Check out our cash for clunkers page for details.
But some analysts warn that the measures attack the wrong side of the car-buying equation. Jesse Toprak, an analyst with Edmunds.com, told CNN that "he would rather see a program that makes it easier for customers to actually get loans, not just provide extra cash or make interest on loans deductible for those who can get them. Right now, he said, auto loans are just too hard to get to begin with."