While cars sit idle on sales lots throughout the country, Washington lawmakers are taking steps to get the car industry rolling again.
The government already slashed sales tax in all 50 states. In North Carolina that tax is three percent of the car’s purchase price. So, if you buy a $20,000 car and get $5,000 for your trade in, you save the sales tax on $15,000 dollars, or about $450.
The credit is only available on new models, and will come back to you at tax time.
“Offering an extra $500 or $1,000 off the price of a car in the form of a tax credit is great, and I think it will get some consumers to move,” explained financial planner Ross Marino.
The Senate is also considering a bill called Cash for Clunkers. It would essentially pay car owners to trade in their old ride, with some restrictions. You have to have owned the car for at least one year, the car has to be made between 1984 and 2001, and average less than 19 miles per gallon according to EPA fuel ratings.
Better fuel ratings will mean better incentives for new car buyers. Owners would get $3,500 if the new car is at least four miles per gallon better, and $4,500 if it’s 10 miles per gallon or better.
“I think this may be the best piece of legislation to really move through some of the inventory the car dealers are holding,” said Marino.
The government is doing its part to try and provide some incentives to buy a new car, but they’re not alone. Dealerships like Jeff Gordon Chevrolet here in Wilmington are offering zero percent financing as well as many rebates, which could add up to big savings for you.
“They have rebates up to $5,000 right now, and they have a loyalty rebate right now, if you own a general motors vehicle you get up to another $2,000 rebate on the vehicle, that’s why it’s such a great time to buy a vehicle right now,” said Tony Holmes of Jeff Gordon Chevrolet.
There’s also a much higher demand for used vehicles, which could save you a few more dollars on your new car.
“It means that they’re actually getting a lot more for their trade-in then they would in just the last six months. So if you have a good vehicle, it’s a good time to trade it in,” Holmes said.
“They don’t have a car affordability index, but if they tracked it I think that would make it the cheapest I’ve seen in as long as I’ve been alive,” Marino said.
So, if the senate passes the Cash for Clunkers bill, car deals might be too good to drive by. It will require plenty of support from car dealers. They would have to allow customers to use the vouchers toward a down payment, and then apply for a government refund.
Opponents of the bill say, as it stands now, some gas guzzlers would still qualify for the rebate.
While that would still mean car sales, they say that defeats the purpose of encouraging more fuel-efficient vehicles.