The Worker, Homeownership and Business Assistance Act of 2009 passed the Senate two weeks ago and was sent to the House of Representatives, where it was quickly approved. This new law extends the $8,000 first time home buyers tax credit and the existing homeowners tax credit until April 2010. One of the key components of this tax credit is that it does not need to be paid back and is instead a one time payment from the Government.

Under the law, most of the old requirements remain the same, but there have been some changes:

• The Income Level has been raised, so now people who make up to $125,000, or $225,000 for married couples, can now take advantage of the tax credit.
• A Cap has also been added on the total price of the home, restricting the tax credits to purchase of homes priced $800,000 or less.
• Existing Homeowners can now take advantage of the credit as well, but will only be able to receive up to $6,500.

These new changes come into affect on November 06, 2009 and can be applied to homes purchased on or after this date. Worker, Homeownership and Business Assistance Act of 2009

Like the old tax credit, homeowners will still be able to file amended tax returns, so that they can receive the tax credit without having to wait until April.

Part of HR 3548 , the Worker, Homeownership and Business Assistance Act of 2009, also is intended to help reduce fraud, by making it easier for the IRS to detect fraudulent claims.

Changes to Unemployment

In addition to changing the tax credit for new homeowners, HR 3548 also extended Federal Unemployment Benefits for those whose benefits are about to expire.

The Worker, Homeownership and Business Assistance Act of 2009 extends everyones Federal Unemployment Benefits for 1 week and anyone living in a state with more than 6% unemployment will be eligible for an addition 13 week extension.

An additional extension was also added, which provides an additional 6 weeks for anyone living in a state with more than 8.5% unemployment. However, with the way the law is worded, those on unemployment must take the 13 week extension first, before they can apply for the 6 week extension. As a result, it will not be possible for anyone to take advantage of the 6 week extension, unless congress decides to renew the legislation. In this regards, this provision of the law was outdated even as it was signed by President Obama.

Other Changes

In addition to changing the tax credit for homeowners and unemployment benefits, the law also requires anyone who prepares or expects to prepare more than 10 tax returns a year to submit them electronically.

The bill that was passed on Wednesday may give the first time homebuyers tax credit a second life, as it is currently set to expire on on December 01, 2009.

The Current 2009 tax credit, which does not need to be repaid, is only available to those who have not owned a home for at least three years and offers up to $8000 to those who qualify.

Under the new law, these benefits would not only be maintained, but also extended to those who have owned a home for five years or more. However, for existing homeowners, only $6500 would be available. Those buying a home would have until June to close on the home, but would have to have singed a sales agreement by April 2010.

In addition to addressing the housing market, the bill also includes provisions to federally fund unemployment benefits for an additional 20 weeks.

Of course, this bill has a long way to go before it becomes law, as it must still pass the House and then it must be signed by President Obama. This is also not the first bill aimed at extending the homeowners stimulus program, with a $15,000 tax credit for homeowners never gaining much momentum.

Before its passage in the Senate, Republicans had wanted to include a provision requiring that those on unemployment be checked using E-Verify, which is a an online service that checks immigration status, before receiving unemployment benefits. They also wanted the stimulus bill to include an amendment prohibiting Acorn from receiving federal aid.

Both of these requests were refuted by the Democratically held senate, but the bill still needs to be passed by the House, so there may still be more changes made to it.

Of course, almost all car companies are reporting some drop in sales in September, which is the first full month with out the government run incentive program Cash for Clunkers.

Saturn, who is in the process of being phased out of production, saw the most significant drop of near 90%.

Boosted by fleet sales, Ford actually weathered the storm fairly well, seeing about a 15% drop in consumer sales, but a 23% increase in fleet sales. In the end, Ford was about 5% below where they were last year in sales. Ford’s Volvo Division, also did quite well, seeing sales increase.

Ford, who was the only company who did not accept bail out money, has been aggressively marketing their cars over seas and overall trouncing other American automakers on most fronts.

Cadillac, which is GM’s luxury brand saw sales increase as well, although this was not enough to bring GM out of the gutter.

Was Cash for Clunkers Enough?

It now is clear that Cash for Clunkers was a very effective means of getting the public to purchase a new car, with it going a long way to stimulating the auto industry.

One of the biggest criticisms of the incentive program was that it might be just getting people to push up their car purchases, but not really stimulating that many new sales. The argument being that perhaps most of those who used the Cash for Clunkers program were planning on buying a new car anyway, but pushed up their time table to take advantage of the program.

While it is still too early to say, it is safe to assume that the record sales of August, when Cash for Clunkers was winding down, will probably not be seen again for some time.

What this Means for Chrysler and GM

With this September Slump in sales, it begs the question whether the boost provided by Cash for Clunkers will be enough to helps the like of Chrysler and GM, who are already fairly close to being unsustainable.

Perhaps the government will have better luck running them than the previous executives though, who seemed to be more concerned with their lifestyle than the direction they had let their companies go.

However, with such a sharp decline, it is hard to think that these companies would be salvageable, well at least not on their own. Fortunately, the tax payers are there, so these companies do not have to worry about making a better product.

This deadline, which was announced last week, has led dealers to scramble to finalize deals, submit applications, and sell new cars. It has also led to a number of consumers pushing up the purchase date of their new vehicle, so that they can take advantage of this rebate program.

The Cash for Clunkers program offers between $3,500 and $4,500 for trade-ins when a new car is purchased. Vehicles that have a 10mpg increase over the trade-in receive the full $4,500 and those with a 4mpg increase receive $3,500.

Originally, $1 Billion was allotted for the Cash for Clunkers Program, but due to higher than expected demand, this budget was expended in only a few weeks. Congress then approved an additional $2 Billion last week, but demand did not decrease and it is expected that by tonight, this budget will be met.

Can the Dealer Make Me Pay Back the Rebate if it is Not Approved?

The short answer to this is NO. This is illegal for the dealer to do.

With only a few hours left to purchase a new car, many consumers are scrambling to take advantage of the program and dealers are continuing to use it as a selling point. So, it is important to note that under the program, car dealers are 100% prohibited from making you sign a contract saying you must repay the discount if the Cash for Clunkers application is not approved.

If the dealer suggests that you must sign this sort of contract, they are violating the terms of the Cash for Clunkers program and should be reported, as this is illegal.

All pending Cash for Clunkers Applications must be submitted by dealers no later than 8 PM EST on Monday.

Congress and the Department of Transportation decided on the premature end date after analysis showed that the program was quickly approaching its budget. They project, however, that there should be enough money to process all transactions up until Monday.

With the announcement of the deadline to submit applications for the Cash for Clunkers Program, new car dealers are expected to aggressively push the program this weekend.

Thus far, over 450,000 new cars have been purchased as part of the program with almost $2 Billion in rebates paid by the government. The next three days is expected to allow the car dealers to finalize any pending sales and give consumers a chance to take part in the program.

The Cash for Clunkers Program, which provides rebates of up to $4,500 for trade-ins, gained a great deal of attention over the last few weeks, when it quickly expended its $1 Billion budget. The program is intended to offer an incentive for Americans to purchase a new more fuel efficient vehicle, with the engine of their older model being destroyed. This is intended to not only stimulate new car sales at a time when many auto manufactures are struggling, but also help create a more fuel efficient fleet of vehicles.

Congress and President Obama apparently did not expect the program to be so popular, nor to generate as many sales as it did, as the original budget was depleted within a month of the programs start. The program had originally been slated to run until November.

To help revive the program congress agreed to give the program an additional $2 Billion last week, but this was obviously not enough to curb the popularity of the Cash for Clunkers Program.

With many car manufactures reporting record sales, including GM who announced they would reinstate a number of union jobs, it remains to be seen whether these sales figures will remain steady after the Cash for Clunkers Program is over, or if sales will rapidly decline as the program ends.

This increase means adding shifts to GM plants in both Ohio and Canada, to help keep up with demand. This increase is expected to add over 50,000 new GM vehicles, which represents a 20% increase over last quarter. All told, GM estimates that it will produce 642,000 new vehicles in the fourth quarter of this year.

GM is not the only company to show increases in sales. Other car manufacturers, such as Ford, are also reporting greater sales. Ford, who did not accept bailout money and has instead been focusing on making more reliable fuel efficient vehicles, has been expanding its oversees market for some time, which is one reason it was able to avoid many of the problems that plagued GM and Chevrolet.

While some economists are siting this increase in car sales as an indication that the recession is over or drawing to an end, this is rather optimistic. Many of these new car sales are as a result of the Cash for Clunkers Program, which offers up to $4,500 for those who trade in an inefficient vehicle.

Are the Sales Sustainable

Since a great number, if not the overwhelming majority, of these new car sales come as part of the Cash for Clunkers Program, the question remains, will people continue buying cars when the program expires in November.

It is likely that many people who had been planning on purchasing a new vehicle in the future, decided to buy a new car earlier, so that they could take advantage of the economic stimulus program. The supply of those wanting to buy new cars is not finite, so it is possible that the Cash for Clunkers program generated a great number of sales early, but once the plan expires, sales will drop lower than they were before.

While it is certainly a very good sign that GM is adding more shifts and that our car companies have had a few very good months, it remains to be seen as to whether this will be enough to pull them out of the danger zone.

This FAQ answers some of the frequently asked questions about the Cash for Clunkers Program, so you can take advantage of this incentive.

What is the Cash for Clunkers Program?

The Cash for Clunkers program is program offered by the government to provide an incentive to purchase a new car. The program provides up to $4,500 for traded in vehicles, providing they meet several requirements.

How Much Money is Available for Trade Ins?

One of the main parts of the Cash for Clunkers Program is that the new vehicle purchased must have an improved gas mileage.

If there is a 4mpg increase $3,500 is offered for the trade in.

If there is a 10mpg increase, $4,500 is offered for the trade in.

Do I Need to Submit a Voucher?

No, participating dealers will do all the paper work and apply a credit towards the purchase of a new vehicle.

Can I Buy a Used Car with the Cash for Clunkers Program?

No, the car purchased must be a new vehicle.

What Types of Cars Can Be Traded In?

The Trade In must have been manufactured within the last 25 years, have at most an 18mpg fuel rating, and be in running condition.

Does the Trade In Need to Be Insured?

Yes, the trade in must have been insured and have held a valid registration for the last year.

Are Totaled Vehicles Covered?

Yes, you can trade in a car with a salvage title, providing it meets the other requirements.

Can Work Trucks Be Traded In?

Yes, work trucks can be traded in as part of the Cash for Clunkers Program. Work trucks do not have the same fuel efficency requirements, but must not be manufactured after 2001. Class 2 and Class 3 trucks are covered and must be traded in for a truck of similar size. $3,500 is offered for work trucks.

Can Married Couples receive Two Credits?

No, under the Cash for Clunkers Program, each household is only allowed one credit.

Do Leased Vehicles Apply for the Cash for Clunkers Credit?

Yes, leased vehicles are covered.

Do I have to repay the dealer if the deal is rejected?

No, if the dealer says you must sign an agreement repaying the credit if the Cash for Clunkers application is rejected, this is not true.

What About Large SUVs

Vehicles that weigh over 8,500 pounds are classified as Class 3 vehicles and do not have a fuel rating set by the EPA. This is one way SUV Manufacturers managed to get around many of the fuel and emissions requirements set by the EPA.

As a result, a larger SUV, weighing over 8,500 pounds, is classified as a work vehicle and only eligible for a $3,500 credit. The SUV must also not have been manufactured after 2001.

What Happens to my Old Car?

The engine of the old car must be destroyed by the dealer, because the Cash for Clunkers Program is designed to take older innefficient vehicles off the road.

The other parts, however, are recycled and sold in scrap yards. This means that the transmission, body, and even mirrors can all be potentially reused. Of course, the engine is also recycled as scrap metal.

The Cash for Clunkers program is designed to provide an incentive for Americans to trade in their older car for a new more fuel efficient vehicle. The incentive program offers $3,500 or $4,500 for vehicles that have a 4mpg or 10mpg increase in fuel efficiency respectively. As part of the Cash for Clunkers incentive program, the trade in vehicle must be destroyed.

The bill that was passed in the Senate yesterday comes a week after announcements that the budget for the Cash for Clunkers program had been expended. The US House of Representatives quickly passed a bill the following day, allocating an additional $2 Billion. This bill was passed by the Senate a week later, with a vote of 60 to 37.

While there are some legislators that are very critical of the Cash for Clunkers program, it is hard to say that it has not stimulated the economy. It is estimated that more than 250,000 new cars have been bought so far as part of the stimulus program. This has a very big impact on new car dealers, but it also helps out many other industries, including scrap yards and metal recyclers.

The scrap yards are not able to use the engine of a car traded in as part of the Cash for Clunkers program, because the engine must be destroyed. However, they can recycle the other parts on the car to sell them used. The rest of the vehicle is subsequently recycled for scrap metal.

While the Cash for Clunkers program does offer a number of real time benefits, both for new car owners and for new car dealers, it also will have a very big long term effect.

A 4mpg Increase is Nothing to Scoff At

Each of the new cars purchased as part of the incentive program must at least have a 4mpg increase in fuel efficiency. Since the trade in vehicles are essentially decommissioned and taken off the road, this means that this program significantly increases our overall fuel efficiency. Over the course of five or ten years, this will account for greatly reduced gas consumption.

When considering vehicle gas consumption and fuel efficiency, it might be easy to think that 4mpg is an insignificant number, but this is not necessarily the case.

To put this in perspective, take a car that gets 15mpg and a car that gets 30mpg. If each of these cars are driven 10,000 miles they will use approximately 667 and 333 gallons of gas respectively.

An increase of only 4mpg to 19mpg and 34mpg, will have a much larger effect on the low gas millage car than the less fuel efficient car. The 19mpg car will use almost 141 fewer gallons of gas every year, while the 34mpg will only use 39 fewer gallons of gas.

As a result, increasing fuel efficiency by 4mpg in our less fuel efficient vehicles will have a very big impact on our gas consumption as a country.

The bill, which draws the extra funds from a U.S. Department of Energy program, still needs to be approved by the Senate, which is expected to vote on it this week.
With its additional $2 Billion budget, the Cash for Program would be slated to continue until its November deadline or the funds run out again.

The Cash for Clunkers program originally set aside $1 Billion to provide an incentive for Americans to purchase a new car. The program allots up to $4,500 to people who trade in an old car for a new one with improved gas millage. Dealers all over the country quickly signed up for the program and by the end of July had expended the $1 Billion Cash for Clunkers Budget.

There has not been an official tally yet, but it is estimated that around 250,000 applications have been submitted to the Cash for Clunkers program, with each of these applications representing the purchase of one new vehicle.

Pundits on both sides of the aisle have been quick to draw conclusions from the Cash for Clunkers expended budget. Some claiming that it is evidence that the government could not handle a healthcare program. However, this conclusion is based more off of a need to find faults with nationalized healthcare, than with an actual correlation between healthcare and the Cash for Clunkers Program.

The purpose of the Cash for Clunkers program was to get Americans spending again, purchasing new cars from struggling auto dealers and that is exactly what the program has done. This economic stimulus program preformed just as expected and in fact exceeded most expectations, generating quite literally hundreds of thousands of new car sales at a time when the auto industry needed it most. A budget was created that had a time limit on it and the budget was simply expended before the time limit was up.

While there are a great number of conclusions that could be drawn by the expenditure of the Cash for Clunkers Budget, not all of them positive, to assert that it is an indication that the government can not run a healthcare program is disingenuous at best and an outright lie at worst.

The Cash for Clunkers program is designed to provide an incentive for people to trade their older vehicles for a new more fuel efficient car. Those that trade in a car that is 4mpg for fuel efficient receive $3,500 and $4,500 is provided for a 10 mpg increase. As part of the program, the traded in vehicle must be destroyed.

The Cash for Clunkers program was slated to run until November 01, 2009 or until its $1 Billion budget had been expended. However, it has become very popular and by July 28, around 16,000 dealers had signed up for the program.

If each of the dealers currently participating in the Cash for Clunkers program were to submit only 18 applications, the program’s budget would be completely depleted and there are reports that some dealers have already submitted more than 250 claims.

At midnight on Thursday, the Department of Transportation reported that the Cash for Clunkers program was being suspended, but these claims were later refuted by the White House Press Secretary Robert Gibbs who said, “We are working tonight to assess the situation facing what is obviously an incredibly popular program.”

Gibbs went on to say, “Auto dealers and consumers should have confidence that all valid cars transactions that have taken place to date will be honored.”

Reports that the Cash for Clunker program had been canceled fueled an increase in nighttime purchases by car dealers. To date, $150 million has already been paid out as part of the Cash for Clunkers program and $850 million is slated for pending applications.

Both Congress and the White House are reportedly looking for ways to continue funding for the Cash for Clunkers program, as it has proved an effective means of increasing new vehicle purchases and upgrading to more fuel efficient vehicles.