Stimulating Car Sales

The auto industry has snared a small spot in the Senate’s economic stimulus bill.

Lawmakers added an $11 billion amendment yesterday to the $900-billion package that calls for a temporary tax break for new-car buyers. The amendment, proposed by Sen. Barbara Mikulski (D-Md.), is meant to spur showroom traffic and ultimately boost car sales.

Here’s how it would work: Anyone who buys a car beginning Nov. 12, 2008, through yearend 2009 is eligible to claim a tax deduction for the sales tax and any loan interest. There are two caveats: The vehicle must cost less than $49,500 and the car buyer must earn less than $250,000.

The bottom line: The tax break should save car buyers $1,500 on a $25,000 vehicle.

Is $1,500 enough to jumpstart vehicle sales? I doubt it, especially considering that manufacturer incentives averaged $2,700 in January, according to Edmunds.com, and still vehicle sales tanked.

Don’t get me wrong, I’m all in favor of ideas to get vehicle sales moving again. But in my estimation, it’s just going to take time.