When Congress passed a new law to give people up to $4,500 to junk their old cars and buy new, more efficient ones, the auto industry cheered. But some charities say they'll be the unintended victims of this program, and so will the low-income people they try to help.
Emma Johnston needs a car to shuttle her three kids to school and day care around Alexandria, Va., a Washington, D.C., suburb, transport her almost 40 miles to her part-time job, and then get her back to paralegal classes.
But the 1991 Toyota Camry she bought online let her down.
"My vehicle just went completely dead," Johnston says. "Everything just went bad."
She had been renting a car for $200 a week, but she couldn't afford to continue. Then, she heard about Roger Penn's charity, the Car Ministry. It fixes donated cars and gives them away, mostly to single moms.
Penn set her up with a donated 1995 Oldsmobile Ciera in good working order.
"You're good to go," Penn said as Johnston revved up the engine on her blue sedan late last week.
Penn worries that the $1 billion "cash for clunkers" program will make matches like this one much harder to make and limit the good quality used cars available for resale at car lots and auctions.
"This is kind of a typical car that would perhaps be junked under that cash for clunkers law. But look at it: It's really a nice car. It drives well. So why wouldn't somebody benefit from that?" Penn says.
Government Incentives
Starting later this month, the government will give people $3,500 for scrapping gas guzzlers if they buy new cars that go at least four miles further on a gallon of gas, or $4,500 if the new vehicle gets 10 miles more per gallon.
"Maybe the new cars will get better mileage," Penn says. "But what about the people who can't afford to buy a new car? They need transportation. And if they don't have it, they won't be able to get to work. They won't be able to get the medical help they need, because they won't be able to get to dialysis."
A Rebate System
Rep. Betty Sutton (D-OH), one of the main sponsors of the CARS Act, says that's certainly not the intent of the program.
"The act, of course, is to help consumers help our environment and to stimulate auto sales at this time when they're lagging and so many families across this country depend on them for putting food on the table and keeping them employed," she says.
One of the reasons Congress restricted the program to cars that get 18 miles-per-gallon or less was because of the charities' concerns, Sutton says.
"Actually, it severely cut down the number of cars that might be traded in under the cash for clunkers program, and thereby making all of those cars available for charitable donations," she adds.
Fewer Donations
Still, some charities complain that the program will put a financial strain on them when donations have dropped because of the recession. Most donated cars aren't given away; they're sold. And the proceeds go to charities.
"There's a whole industry that helps support the charities, including the auctions, tow truck drivers, telephone answering personnel; and all of those people are going to be hurt," says Pete Palmer, a co-founder of the Vehicle Donation Processing Center, which handles the sales of donated cars for 400 charities.
Donors can take tax deductions for the small amount charities usually get for those sales.
"Somebody has to be pretty darn altruistic to do a car donation over the cash for clunkers program if they want the new car," Palmer says.
Some charities are lobbying against an effort to extend the cash for clunkers program, which is scheduled to expire Nov. 1.
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