Representatives of the state of Texas feel that the way to curb pollution is to get older cars off the roads. This isn't a bad idea, but I'm not so sure about the way they are doing it. I've discovered other states, Vermont specifically, have offered this as well.
Here's how the program works. Say you are a family of 4 with a pre-1996 vehicle. If your annual income is less than $41k, you qualify. You can take your old car to a dealership where you can get a $3,000 voucher towards the purchase of a new or 3 year old used vehicle. The dealers get no money for your trade, which is given to a salvage yard at no cost, and there is no indication that the dealer offers any trade in value other than the state sponsored voucher.
You can then use that voucher to purchase a 2004 and up car or light truck.
Here's the problem. The cheapest 2004 vehicle in the state of Texas (from autotrader.com) is $4,500 plus TT&L (remember this is a dealer, so you will likely be paying many fees on top of the asking price). A small number of cars in this year range are below $10k. Most are above. The maximum you can buy is a $25k vehicle. The very idea that a family of 4 making less than $41k a year should go out and buy a brand new car is absurd, but at least they allow used.
Regardless, it is more than likely that the family is going to have to take out a loan to get this new vehicle. I find it incredible that the state is encouraging people with low incomes to go out and buy brand new cars by dangling a check for $3,000 in front of them. If they are driving a pre-1996 vehicle, isn't it safe to assume that they can't afford a new car to begin with? Is $3k going to make any difference? Is the state of Texas encouraging debt? Will the state of Texas help them if their car is repossessed because they can't make the payments?
In reality, the people who will most likely take advantage of this is people who were already planning to trade in their clunker for a newer vehicle, or were planning to. Thus, we have a state funded car purchase - the funds for this program were collected by raising vehicle registration rates.