The Cash for Clunkers program is designed to take gas guzzling vehicles off the road and reward consumers for purchasing new fuel efficient vehicles. Consumers can trade in their older cars and trucks for new ones that meet specific requirements. The Car Allowance Rebate System (CARS) began in late July and is scheduled to run until November 1st, or when funds are exhausted. Congress recently approved an additional $2 billion to fund the CARS program. It is estimated it will last into September.
There are several requirements to qualify for Cash for Clunkers. The trade in vehicle must be legally registered and insured for the year prior to the trade. It also must be less than 25 years old with a clear title. Vehicles with liens will not qualify and the title must be in the name of the person applying for the rebate. The trade in vehicle has to have a fuel economy of 18 MPG or less and be in drivable condition. A new vehicle priced under $45000 needs to be purchased or leased to receive the rebate. If leased, the contract has to be a minimum of five years. The rebate will not count towards the purchase of a used vehicle even if it has better fuel economy. The rebate voucher goes directly to the dealership if the qualifications are met and is applied to the purchase price of the new vehicle.
The rebate amount varies based on the improvement in fuel economy over the trade in car. If the new car is an improvement of 4 or more MPG, the rebate is worth $3500. It increases to $4500 if the improvement in fuel economy is 10 MPG or more. Truck and SUV rebates are based on category, MPG improvement, and what new vehicle is being purchased. The rebate amount will be either $3500 or $4500. Work trucks can qualify but the rebate is capped at 7.5% of the total funds for the program and special rules may apply.
The car dealerships will not be giving trade in allowances on vehicles; if the trade in is worth more than the rebate voucher, the program will not be of any benefit. Eligible cars will be scrapped and the scrap value will be an additional savings toward the purchase of the new car. If a car dealership or manufacturer has any special offers available they can be used in conjunction with the program. Dealerships cannot charge the consumer a fee for using Cash for Clunkers, though usual taxes and fees will still apply.
I know one guy who traded his truck in for a new Jeep and his truck was just meeting the minimum requirement. That was a good deal for him because he walked away with a 2009 Jeep for only $15,000.