• by Karl Greenberg , February 17, 2009

R.L. Polk & Co., a Southfield, Mich.-based market consultancy, predicts that the proposed government incentive will increase U.S. light vehicle sales by 94,000 units in 2009, providing consumers with an average rebate of $330 for each new vehicle purchased.

The firm notes that Sen. Barbara Mikulski, D-Md., has spearheaded a provision within the package to help revive the automotive market. The package in its current form would allow consumers who buy a new vehicle to deduct the sales tax from their income taxes.

A previous proposal also included a deduction for interest expenses on new-vehicle financing. Under that plan, Polk estimates, the average rebate would have been $1,250 per vehicle--and would have provided a sales boost of 359,000 units in the U.S.

"Although the current tax incentive is not as generous as the initial one, it is nevertheless an encouraging measure. This incentive program could be even more successful if coupled with additional steps to boost consumer confidence that would drive more showroom traffic for dealers," said Lionel Yron, director of Consulting & Analytics at Polk, in a release.

He notes that Hyundai's just-launched "Hyundai Assurance" program, which lets buyers return new Hyundai cars within a year if they get laid off or have health crises, lifted Hyundai's sales by 14% in January while overall, the industry is down 37% compared to January 2008. "The magnitude of this gap hints at how much market uncertainties weigh on consumer spending," said Yron.

The firm notes that in Germany, consumers can receive a rebate of €2,500 ($3,200) if they scrap their old vehicle when purchasing a new one. According to Polk estimates, this measure is expected to increase light-vehicle sales by 200,000 units for 2009, and should push the German car market just above three million units.