Putting the Brakes on 'Cash for Clunkers'

As an additional two billion dollars gets pumped into the 'Cash for Clunkers' program, some consumer advocacy groups are trying to put the brakes on the effort.

The program, which pays consumers cash vouchers towards buying a new car after turning in their older gas-guzzling vehicles, blew through its allotted $1 billion in less than a week. In an emergency bill this morning, the House of Representatives approved an additional $2 billion of funding for the plan.

Because the billion dollars allotted to the program have burned up so quickly, questions have been raised about the oversight and accountability of the program, Lena Pons, policy analyst for Public Citizen's Congress Watch Division, said.

Extending the program without a thorough study, she said, would be extremely misguided.

"Additional funding for this program is by no means urgent," Pons said, "and certainly should not be based solely on self-serving reports of automobile dealers who stand to gain most from the program."

Pons warned that additional research needs to be done before the Senate votes on the emergency bill, which is set for next week.

Her concern stems, she said, from the fact that the figures are based only on estimated sales and not actual sales, so it's difficult to judge whether the program actually accomplished the goals of stimulating the economy while reducing emissions.

"The speed with which these funds may have been exhausted underscores the need for real-time information about the transactions," Pons said, "so that analysts can ensure that the program is working and Congress can ensure it is funding an effective program, not just giving a multi-billion dollar handout."

Among Pons' specific concerns are that the National Highway Traffic Safety Administration, which is compiling data from the program, has not yet released information regarding the average fuel efficiency between the new cars and the traded cars; what fraction of the sales resulted in the purchasing of new trucks instead of more fuel efficient cars; how many people have bought new cars because of the incentive compared with those who didn't; and whether the old cars being turned in were even being driven at the time or instead were being turned in by the owner to earn the cash without reducing emissions.

Better Business Bureau Warns of Scams

Concerns have also been raised by the Better Business Bureau, which has started investigating potential scams that claim to help consumers with their 'clunkers.'

"We're telling people to be careful of websites that claim to assist you," Alison Southwick, a spokesperson with the Better Business Bureau said. "You don't need help, your dealer will do everything for you."

Southwick said the BBB is in the process of compiling data about the possible scams. The fact that schemes have cropped up, she said, is not surprising.

"That's the way the world works," she said. "Cash for clunkers is an extremely popular program that's just being unrolled and unfortunately scammers are going to be looking to take advantage of it."

Nicholas Brennan is a 2009 summer intern with the Brian Ross Unit and attends New York University.

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