'Cash for clunkers' deal set to be approved
6 May 2009

The US has moved closer to introducing a scrappage deal after rival factions within the government agreed a compromise on how it should work.

The scheme, which is called 'cash for clunkers' in the US, will offer taxpayer-funded vouchers of $3500-$4500 (£2300-£3000) on an old vehicle traded in for a more fuel-efficient new one.

Click here to read about the UK's scrappage scheme

The scheme will run for one year and is expected to fund about one million vehicle purchases.

Compromise had to be reached on whether the scheme will apply to all types of cars, or only those built by US-owned companies, or those built in the US. After negotiations, it was agreed that the incentive would apply to all vehicles, regardless of where they are built.

The level of incentive will depend on the fuel efficiency of the cars being scrapped and bought.

The rebate will apply if the old vehicle achieves less than 18 miles per gallon (US) and the new one is rated at a minimum of 22 miles per gallon. The maximum rebate will apply if the fuel efficiency of the new car is at least 10 miles per gallon higher than the old one.

The scheme will be included in President Barack Obama’s controversial climate change bill, and still needs to be ratified by Congress.

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