Jeff Bingaman United States Senator from New Mexico

WASHINGTON – U.S. Senator Jeff Bingaman reported that the Senate today approved legislation that extends the popular "cash-for-clunkers" initiative, which encourages American consumers to retire their gas-guzzling vehicles in favor of purchasing fuel efficient cars.

Last week, Bingaman expressed concerns that the $2 billion to fund the cash for clunkers initiative would be taken from a loan guarantee program aimed at supporting investment in green collar jobs.  But the White House this week assured Bingaman it would work to restore the loan guarantee funding, so he felt more comfortable supporting the measure – which can now be signed into law.

Knowing that cash for clunkers likely will run out quickly, Bingaman today introduced a bipartisan bill that would -- for the long-term -- encourage Americans to purchase fuel efficient vehicles.

Bingaman's Efficient Vehicle Leadership Act creates a program that rewards consumers who buy cars and trucks that get better gas mileage than the average overall fuel economy required for its class.  Motorists who buy models which exceed that CAFE standard will receive a "fuel performance rebate" (claimed on their tax return or paid instantly by the dealer, whichever the buyer prefers), an amount tied to the fuel savings over and above the relevant CAFE standard.  The savings can range from several hundred to several thousand dollars, depending on the vehicle's fuel economy relative to other models of the same size.  Conversely, for inefficient, gas-gulping vehicles, manufacturers will be assessed a fuel performance fee to pay for the program.

"The incentives in this bill will benefit American consumers, American automakers and the American economy. It will give manufacturers another good reason to increase the efficiency of its vehicle fleets, so that customers can get a rebate.  By exceeding the CAFE requirements, automakers and dealers can gain a competitive sales advantage, and consumers will save money both on the vehicle purchase price as well as lower gasoline costs.  Plus, our environment would benefit through reduced greenhouse gas emissions," Bingaman said.

Following is a brief summary of the bill, which Bingaman introduce with Senator Olympia Snowe (R-ME):

• Rebates begin next year (model year 2011), fees begin in model year 2013: Implementing the rebates as soon as possible will provide additional stimulus to the auto industry, as a logical successor to Cash for Clunkers. It also encourages an immediate increase in overall fuel efficiency. Delaying the onset of the fees allows manufacturers needed time to adjust their product plans to incorporate the new incentive system.
• Rebate and fee amounts: The rebates and fees will be calculated by multiplying the difference between the vehicle's fuel economy and the applicable CAFE standard by a prescribed amount.  Higher multipliers are used for vehicles that are 50 percent and 75 percent more or less efficient than CAFE.  This three-tiered structure creates an enhanced incentive for the most fuel-efficient vehicles that mirrors current incentives for hybrids and electric vehicles, and increased penalties for those with the worst fuel efficiency.  Estimated rebates show that relatively fuel efficient vehicles such as the Honda Civic and Ford Focus receiving rebates of about $1,000 under full program implementation.  The Ford Escape Hybrid would be eligible for a rebate of around $2,500, while purchasers of the highly-efficient Toyota Prius would receive about $4,000.  At its rated mileage of 100-mpg, a Chevy Volt rebate would be nearly $8,000, while a Hummer H3 would be assessed a fee of about $2,500.
• In time, the rebates will replace existing vehicle efficiency incentives and taxes: Existing incentives for fuel-efficient vehicles are allowed to sunset upon their current-law expiration date, and purchasers are allowed to choose which of the applicable incentives (the rebate or tax credit) yields them the greatest benefit.  When the fees take effect, the bill will eliminate the "gas-guzzler tax" that currently is in place.  The rebate system eliminates the patchwork of vehicle tax credits and fees with a predictable, tech-neutral incentive system.