Will these car buying incentives get you to buy a new car?
This week President Obama rolled out an initiative for the failing American automakers to restructure. The plan proposes several consumer incentives to jumpstart auto sales. Here are some details on the financial incentives you can expect if you buy a new car this year.
First, the government is picking up the tab on the warranties of General Motors and Chrysler cars if consumers were to buy a new car from these companies. Consumers have been wary of buying these cars since if the companies go bankrupt the warranties may not be honored. Now that problem is gone and these cars should be a little easier to sell.
Next, the federal stimulus package passed earlier this year already has a tax incentive for consumers who buy a car from February 16th to the end of the year. Basically, consumers can deduct the sales or excise taxes from purchasing a new car from their income taxes. In California this tax deduction can be quite significant since sales tax is 8% to 9%. In states with no sales tax this would not be so much of an incentive.
Finally, there are several "clunkers for cash" proposals going around Congress that allows consumers to trade in old or fuel inefficient cars for cash from the government. Essentially, the government is offering to buy crappy cars for more than what they are worth to encourage consumers to buy new fuel efficient cars. However, this proposal may cost the government billions of dollars per year and that money is yet to be found. President Obama seemed to be highly supportive of this plan and a similar program in Germany supposedly boosted auto sales by 20%.
Personally, I plan to drive my ten year old Honda Accord another ten to fifteen years because it is unnecessary to replace it despite the incentives. What do you think? How big of a financial bonus would you need to buy a new car in the current economic climate? If you were offered $3000 to $5000 for your "clunker", would you take it?