The revival of the popular incentives program by the federal government is prompting some insurance specialists to caution prospective applicants. According to several experts, the Car Allowance Rebate System (CARS) can actually give many Americans false hope regarding expected savings.
Experts familiar with the federal program say that the CARS program, also known as the “cash for clunkers” program, does not necessarily guarantee large savings for car owners who trade in their old vehicles. The ‘clunkers’ program aims to get aging cars off the nation’s roads and replace them with more economical vehicles. Applicants can get the maximum amount, $4,500, if their new cars have gas mileage that are 10mpg better than their old vehicles.
The rebate program has prompted hundreds of thousands of people across the nation to flock to dealers and trade in their clunkers. Barely a week after the program was initiated, the federal government had to suspend it for fear that the $1 billion earmarked for it by Congress would run sooner than expected. Congress allotted another billion dollars to sustain the program and allow more car owners to avail of the tax rebates.
Car dealers also expressed excitement over the sudden increase in customers. The clunkers program is one of many stimulus projects that the federal government is set to implement to jumpstart the U.S. economy. The cash for clunkers initiative is apparently showing signs of success as car sales have increased significantly.
According to some experts, however, car owners who have joined the program can end up paying for more insurance than usual. They argue that in the long run, any savings from the clunkers program will just be used to pay for auto insurance. Even with the car insurance average at its lowest level in more than a year, specialists contend that the money saved from the clunkers program can be used up in less than three years.
To avoid this mistake, industry sources recommend considering existing budget and expenditures to see if car owners can cope with the changes to their budget. Even with a new car, drivers should also keep in mind that insuring it can be more expensive and costly.
The improvement in gas mileage can also be insufficient to cover for any extra money shelled out to buy a new car. Conversely, any savings from more economical engines can be lost by paying for more expensive insurance, experts say.