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Cash for Clunkers a.k.a. Car Allowance and Rebate System

Now that Cash for Clunkers is over, consider donating your car. Also, information on whether Cash for Clunkers affects your taxes.

In an effort to stimulate the economy and improve the national emissions (and save people gas, I suppose), the government created and passed CARS – the Car Allowance and Rebate System. This bill means that people who own vehicles with bad mileage will be able to trade them in, buy a new vehicle that gets better mileage, and get a credit applied at the dealers toward their new purchase. The trade-ins will be scrapped.

So if I trade in an old station wagon that was getting 18mpg and get a new Honda Civic, I should be able to get a $4,500 subsidy in addition to whatever I got from the trade in. Or if I bought a somewhat less fuel-efficient car, I could still get a $3,500 subsidy (details below).

Short overview of the program:

  1. The car must get 18mpg or less and have been made after 1984.
  2. The car must be in your name and you must have owned it for at least 1 year.
  3. You must buy a more energy-efficient, brand-new car (costing less than $45,000) to replace it.

What sort of cars qualify?

You can’t just trade in your old car and get the money. Nor can you use the rebate to buy a used car–even a lightly used one.

New cars must be:

  1. 2008-2010 models;
  2. unused;
  3. get at least 22mpg for cars, at least 18mpg for small light-duty trucks, or at least 15mpg for large light-duty trucks;
  4. and cost less than $45,000.

No luxury cars, no used cars, no older cars (though it seems doubtful that older models would be available as new cars).

The old car must be:

  1. newer than 1984 – no classic cars;
  2. registered in your name for at least a year;
  3. insured for at least a year;
  4. and drivable.

It can’t be a car that was on blocks on your lawn, uninsured and undrivable but maybe good for scrap. Even if you tinker with it enough to make it run, if it wasn’t insured it still doesn’t count. This program specifically targets cars that are already on the road.

How much of a credit will you get?

The credit (subsidy) you’ll receive if you use the CARS program is prorated, based on type of vehicle and fuel efficiency improvement.

For cars:

  • For the minimum possible fuel efficiency improvement, 4mpg (from 18mpg requirement for the trade-in and 22mpg for the new one), you’ll get a $3,500 credit on the new car.
  • For an improvement of 10mpg, you’ll get a $4,500 credit.

For small, light-duty trucks:

  • For a 2mpg-4mpg improvement, a $3,500 credit.
  • For 5mpg improvement or more, a $4,500 credit.

For large, light-duty trucks:

  • For a 1mpg improvement, a $3,500 credit.
  • For a 2mpg improvement or more, a $4,500 credit.

Frankly, I’m not very impressed with the mpg improvement requirements for larger trucks. But I don’t have much experience with large trucks, so I’m not sure what kind of mpg is common.

How do you know your car’s mpg?

Obviously, they can’t test each car to see what kind of mpg it’s getting in its present condition. So the program will used listed mpgs which are available on this fuel economy website. You start by selecting your car’s year and move forward from there to select make and model, and possibly model specifics.

The fuel economy listing will show your car’s combined mpg, which is what will be used in the calculations. Our 2004 Nissan Sentra has a combined mpg of 27.

This means that even if your car is only getting an effective 17mpg, you may be listed at 19mpg and therefore not be eligible. So be sure to check before using the program.

How long will the cash for clunkers program last?

Transactions on and after July 1, 2009 are potentially eligible, but the program will not be implemented until late July 2009, around the 24th (according to cars.gov). The program ends November 1, 2009 or when the money allotted to it runs out.

Cash for Clunkers Dealers

Dealers have to be registered in order to participate in the program. Call your prospective dealer ahead of time and ask if they’re registered. You can also check cars.gov, which should be posting a list by July 24, 2009.

This has been a lot of information, so I’m going to reserve my thoughts on the program for a future post. For some other takes on the CARS (cash for clunkers) program, here are a few good posts:


{ 5 trackbacks }

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{ 11 comments… read them below or add one }

Brian July 17, 2009 at 6:58 am

How amazing would this have been if they took my totaled vehicle? I mean its sort of drivable. It moves laterally.

Brian’s last blog post: The Lazy Way To Creating Real Wealth In The Market

Peter July 17, 2009 at 8:22 am

Thanks for the link! Not sure how successful the program will be, but I know that the car dealers are sure taking advantage. Half the car commercials on the air in my city talk about cash for clunkers!

Peter’s last blog post: Common Questions About The Cash For Clunkers Program Answered: Gas Guzzler Rebate FAQ

Miss M July 17, 2009 at 9:34 am

Definitely check if your vehicle qualifies, Mr M’s old pickup truck only gets about 14 mpg. But according to the website it gets too high of mileage to count at 19 mpg. Crazy, otherwise it’s the perfect car to use for this program since it’s only worth maybe a grand. Oh well, we don’t need a new car anyway.

Miss M’s last blog post: Smarty Pig: Great Rates with a Catch

PT Money July 17, 2009 at 10:17 am

Great detail. You’ve got all the info here. I’m anxious to hear your opinion of the program itself. Thanks for linking!

PT Money’s last blog post: Tips for Keeping Wedding Costs Down

kasey at thriftylittleblog July 17, 2009 at 1:26 pm

I think this is a pretty nifty program. Everyone is motivated by money, but fewer are motivated to save the environment. Sounds like a winner.

kasey at thriftylittleblog’s last blog post: My Costly C’s

Jessica July 17, 2009 at 3:17 pm

It’s not immediately apparent on the website, but the old car also can’t be newer than a 2001 model either.

mrsmicah July 17, 2009 at 3:33 pm

@Brian it would certainly be fortuitous. Between that and the insurance company payment…it’d be worth it to get a new car.

@Pete we’re getting a lot of those in our area too. We’ll see how it turns out.

@Miss M yep, there can be a real difference between what you’re getting on a vehicle and how it’s listed. I suppose the logic is that you could get it into that condition again.

@PT Money that’ll come Mon or Weds, we’ll see.

@kasey it’s nice that it has another practical effect than just, perhaps, stimulating the economy.

@Jessica good point. I don’t think I ran across that, I’ll have to check. It makes sense, as buying a car in the last 10 years that gets 10mpg or less means you wanted a guzzler, not you’re trying to squeeze every last penny out of an old, paid-off car.

Pamela July 18, 2009 at 2:41 am

Hubby’s car misses the mark by 2 mpg and mine misses by 3 mpg. Bummer. Oh well, it’s not as if we have money for a new car now anyway…

jared July 18, 2009 at 12:00 pm

buyer beware, scams are popping up all over the internet and at certain dealerships

http://tinyurl.com/nlv3ed

karenc July 20, 2009 at 3:01 pm

The program is really just for pickups and SUVs since most cars won’t qualify. You can always donate car to charity and get a tax deduction. Your car doesn’t have to run, either!

krelly July 21, 2009 at 8:29 am

What if you buy your totaled car back from insurance company, the damage has not rendered it undriveable but they exceed the value of the older car, can you then use that car? It is still registered and insured, but the insurance value is zero.

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