By: jackie.sauter

The Automotive Aftermarket Industry Association wants you to know that a program known as “Cash for Clunkers” being considered for the president’s economic stimulus package “is really a wolf in sheep’s clothing.”

The program would allow owners of sports utility vehicles to trade them in for federally-funded vouchers (up to $4,500, depending on the year the vehicle was made) to purchase cars with better fuel efficiency. The idea is to get money in the hands of people who would go out and buy new cars, and get the old cars off the road so fewer emissions are produced.

Sounds pretty good, right? The AAIA clearly doesn’t think so.

Because the “clunkers” would be used for scrap, the automotive group says the consequences of such a program would be that taking those SUVs out of the used car market would raise the price of all used vehicles and mean that people with low or fixed incomes won’t be able to buy them.

Steven D. Levitt, who writes the Freakonomics blog for the New York Times, wrote in an August post that the clunker program would likely only pull in cars that people rarely drive, meaning that the cut in emissions would be minimal. Levitt also agreed with the AAIA’s stance.

“In response to the program, the price of nine-year-old cars would have to rise enough to offset the increased value associated with a near-clunker someday becoming a clunker that can be sold to the government. The benefits of the program will actually be spread widely over all car owners, not narrowly focused on the poor.”

It sounds like Congress has a lot to think about.

DANIELLE ULMAN, Business Writer