Parts Dealers Oppose ‘Cash for Clunkers’

The following story from the Silicon Valley/San Jose Business Journal explains the conflicting interests on both sides of the current Cash for Clunkers legislation…

Story written by Kent Hoover:
Automobile dealers and auto parts dealers are on opposite sides of the issue when it comes to President Barack Obama’s endorsement of “cash for clunkers†legislation.

Under legislation introduced this year in the Senate, consumers could get a voucher worth $2,500 to $4,500 if they trade in their old gas guzzlers for new fuel-efficient vehicles. The voucher could be used as a down payment for a new car or used for public transportation. Similar legislation has been introduced in the House.

Obama endorsed the concept March 30 during his remarks about the restructuring of General Motors Corp. and Chrysler LLC. He said these kind of incentives “have been successful in boosting auto sales in a number of European countries.â€Â

“I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program and make it retroactive starting today,†Obama said.

Auto dealers, understandably, like the idea. The National Automobile Dealers Association applauded the proposal as a way to stimulate demand for new vehicles.

The Automobile Aftermarket Industry Association, however, said the proposal would waste taxpayers’ dollars, raise prices for used auto parts, harm the environment and threaten jobs at vehicle service and repair businesses.

“It seems arrogant to destroy perfectly good vehicles with many more years of useful life just to entice consumers to purchase a car that they might not be able to afford,†said AAIA President and CEO Kathleen Schmatz.

The Specialty Equipment Market Association likes incentives for purchases of new vehicles but doesn’t like incentives for turning old cars into scrap metal. This hurts the environment more than it helps because it artificially shortens a car’s life, the association contends. The European Federation for Transport and the Environment came to the same conclusion about Germany’s “cash for clunkers†program, it said.

The Internal Revenue Service, meanwhile, reminded taxpayers of an incentive that already exists for buying new cars: the ability to deduct state and local sales taxes and excise taxes on vehicles purchased this year after Feb. 16. The deduction can be made on tax returns for 2009, not 2008.

The deduction is limited to taxes paid on as much as $49,500 spent on a new car, light truck, motor home or motorcycle. The amount of the deduction phases out for higher-income taxpayers.