Making its way through the capitol building right now is a proposed plan that’s become known as Cash for Clunkers. If passed, the program could offer up to $4500 to people willing to retire their older, less fuel efficient vehicles in order to purchase a new greener and cleaner vehicle. It’s just one more incentive to get people back onto dealer’s lots in an attempt to help jump start an economy moving slower than the cars the proposed bill hopes to replace. But scrapping cars only helps those who already have jobs and can afford to buy a new car.

This is a great plan for automakers who need to move product at a time when companies like Toyota and Honda, who until recently didn’t even know what red ink looked like, are having to adjust production to compensate for the economic downturn. It’s also a great plan for those who can afford to buy a new car, after all, $4500 is still nothing to sneeze at, and many households still have that third car that’s only used when one of the others are in the shop, or have one fairly new car and one older car that they have been waiting for the economy to pick up before replacing.

But there are many people who can’t afford to buy a new automobile—people who are part of the escalating unemployment rate, or have found new jobs, but with incomes much lower than what their pre-economic crisis lifestyles required. Many families can’t afford a car payment no matter how big the incentive and rely on inexpensive vehicles for their transportation needs. This bill essentially eliminates those low priced vehicles from the market by establishing the base price of a cheap used car at $4500.

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GMAC Financial Services is launching several measures to help ease car purchasing, including extending credit to subprime borrowers. The initiatives announced today also will help ease the burden on dealers from unsold inventory.

Though GMAC is resuming loans to people with scores under 620, the company says that customers still need to prove that they can repay the loans. In addition to helping subprime borrowers, GMAC is making $5 billion available to customers to increase the flow of credit. GMAC also will reduce interest rates on consumer loans for new and used vehicles, and it will increase the amount car buyers can borrow for financing terms up to 60 months. All of the efforts should get more customers into cars.
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Running counter to every current car sales trend, new car registrations in Germany skyrocketed 21 percent in February. The reason: A new scrapping program that gives owners of older cars nearly $3,200, plus a year free of road taxes, if they scrap their older car for a newer model.

In an article on Time magazine’s website, the program has put a lot of Germans into new cars in February, but the long-term implications aren’t clear. Similar programs in France, Italy and Spain haven’t produced the same sales bump, likely due to the lower incentive. And while manufacturers are pleading with the British government to implement a similar program, so far it hasn’t happened.

While it seems a no-brainer on the surface, there are repercussions. A similar program in the 90s produced a similar sales bump, but it also caused a sales decline when the program was discontinued. In addition, two thirds of the sales surge in German went to non-German makes like Fiat and Renault, which doesn’t exactly help the domestic industry. This is likely why the British government hasn’t stepped in with a similar program, since most of the money wouldn’t support the relatively small British car making industry. Instead, the article speculates that the billions in government loans to the industry may have a longer-term effect in keeping the manufacturers afloat.

Time