The Obama administration’s Cash for Clunkers program (also known as the Car Allowance Rebate System, or CARS) is designed to help the environment by getting older, less fuel-efficient cars off the road and replacing them with newer, more efficient vehicles. The administration also hopes the program will stimulate the economy by encouraging new car purchases. Cash for Clunkers goes into effect July 2009 – but you have to act fast – it’s only good for cars purchased between July 1, and November 1; or until the funds run out, whichever comes first.
The program works by offering a $3500 or $4500 rebate to new car buyers who replace an older, less fuel efficient car with a new, more fuel efficient vehicle. Basically, if the new car gets 4 more miles per gallon than the old car, you’ll get $3,500. If the new car gets 10 miles more per gallon than the old car, you’ll get $4,500. Sounds good, right? Well – it could be – but only under the right circumstances.
This is important: cars brought in for Cash for Clunkers have to be destroyed. The remains will be sold for scrap. You will receive the scrap value (usually a few hundred dollars) in addition to the rebate. If the trade-in value of your old car is worth more than the rebate plus scrap value, you may be better off using your car as a trade-in. Edmunds.com has developed a list of vehicles that are practically guaranteed to have a lower trade-in value than the value of the voucher and are therefore good candidates for the program. Click here to see the list.
What You Need to Know About Cash for Clunkers
Your old vehicle must be less than 25 years old and get 18
miles per gallon or less to qualify
Your new vehicle may be purchased or leased
Your new vehicle must be new – used vehicles do not qualify
Your new vehicle qualifies only if the sticker price is $45,000
or less
The new vehicle must get at least 22 mpg to qualify – a new
light truck, van, or SUV qualifies if it gets at least 18 mpg
You may not trade-in your old vehicle. Your old vehicle
will be destroyed and sold for scrap. You will receive the
scrap value (usually a few hundred dollars) in addition to
the voucher but you will not get trade-in value to offset the
cost of your new vehicle
Your old vehicle must be drivable and registered and insured
for a full year before participating in the program – this is to
discourage “flipping” junkyard treasures
Cars purchased between July 1, 2009 and November 1, 2009
are eligible for the rebate program but only while there are funds
available. The program ends November 1 or when the funds run
out, whichever comes first.
Bottom line, if you have an old, inefficient car with a trade-in value of less than the $3500 or $4500 voucher you would receive, the Cash for Clunkers program may be of benefit to you. Money in the bank! But if you need to buy a used car, or need to use your old car for its trade-in value, think again. You may be better off purchasing your next vehicle through a more traditional route.
The U.S. Department of Transportation is still finalizing rules for the program. Go to CARS.gov for the most current information and updated FAQs.
Sources: cars.gov, Edmunds.com