House Approves 'Cash for Clunkers' Trade-In Program

June 10, 2009

The House of Representatives today voted to approve the so-called “Cash for Clunkers” rebate, a program designed to replace old inefficient gas guzzlers with newer, more fuel efficient cars, and stimulate the struggling auto industry. Car owners would be given vouchers for up to $4,500 toward a new car in exchange for having their old one hauled off for scrap.

The program is an adaptation of several European laws that are expected to stimulate the purchase of 400,000 to 500,000 new vehicles in the next year. The United States government is willing to offer up to 1 million such vouchers at a cost to taxpayers of $3 billion to $4.5 billion, with the funding coming from the existing $787 billion stimulus package.

The House legislation requires that older cars getting less than 18 miles per gallon be replaced with 2004 or later model year vehicles getting at least 4 mpg more. A different version of the bill, which mandates a 25 percent increase in fuel economy between the old and new vehicles, is currently under consideration in the Senate. Senator Diane Feinstein, author of the Senate proposal, says that her bill would result in 32 percent more oil savings than the bill passed today by the House. It’s unclear which version of the legislation will ultimately make it to the President’s desk, but lawmakers seem confident that a “Cash for Clunkers” bill will be signed into law in the near future.

Those looking to cash in on the law should remember: only cars getting less than 18 mpg are eligible to be traded in, and in order to take advantage of the full $4,500 voucher, car buyers would need to increase their fuel efficiency by at least 10 mpg. The icing on the cake is that the discount can be applied in addition to any hybrid or electric car tax credits, or other deductions already in place.


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  • FusionHybridMan

    As well intentioned as the “cash-for-clunkers” is meant to be I’m not convinced it will accomplish what it is designed to accomplish.

    As the bill is currently written you can trade in an old SUV that gets 13 mpg, and buy a Hummer H2 (18 mpg) and get a $3500 rebate. Is this really going to help?

    (If you trade in an old SUV and buy a new one that gets at least 5 mpg better you can get a $3500 tax credit)

    I don’t think any vehicle that get’s less than 24 mpg should qualify, and for the full rebate, they should be over 30 mpg. -Just my thoughts.

  • DetroitGuy

    At this point 5.6% of the 787 billion stimulus has been used. This program looks like it’s just for moving inventory (a lot of it still getting poor gas mileage brand new.) With that said I agree with ya FusionHybridMan; it’s too bad more miles per gallon vehicles aren’t being pushed.

  • vcorcl

    It seems that the stimulus plan always punish the good citizens and corporation that did the right things and bailed out the individuals and corporations who screw out. Under this law, people who already drive smaller cars (mpg >18) would not qualify for a voucher to pump up the mpg while those who drive a gas “suckers” will get a second chance. The Congress is so out of touch!

  • hadleysw

    Actually, trading in a 13 mpg SUV for an 18 mpg H2 will save more gasoline than trading a vehicle at 25 mpg for one at 50 mpg. 13 mpg means 7.7 gallons/100 miles, while 18 mpg is 5.6 gal/100 miles, so the trade would save 2.1 gallons for every 100 miles driven. The 25 mpg car is 4 gal/100 miles, the 50 mpg is 2 gal so the saving is only 2 gallon per 100 miles.

    Since to the first order the miles driven is the independent variable, we would have better analyses if everyone used gpm instead of mpg. The goal is to reduce the gallons for the miles driven, not increase the miles with the same amount of gas.

  • bwagsbags

    I think I read somewhere that the mpg is based on the window sticker. Since the testing standards for what goes on the window sticker changed a few years ago a car that had 18mpg then is ~10% less fuel efficient than a car getting 18mpg now. Just saying, a 4mpg increase is more than it seems.

    Also going from a 14mpg car to a 18mpg saves 1.6gallons/100miles while getting a fusion hybrid instead of a normal fusion 25mpg to 39mpg saves 1.4gallong/100miles. Just some perspective.

    And a H2 does not get 18mpg. More like 10.

  • European

    You’re correct Stan.
    Why Americans still use MPG but not litres/100 Km as the latter is used everywhere in the world?

  • moishe k

    What is the max IQ allowed in congress?

    Taxi drivers burn the most fuel per day (Gallons per day) GPD counts more than MPG

    any incentive or law to change taxis to the most efficient car available would result in maximum fuel saving nationwide these cars are than sold to lower income drivers who a $5000 check wont make them buy a new car anyway

  • ChicagoGal

    Would love to buy a Hybrid, like a Toyota Prius or Honda (Insight or Fit – coming out in 2010) and get rid of our Mazda Protege, circa 1994/1995. But so far Hybrids have been way out of our financial reach, but wont be with this incentive, and tax credits. But wondering how to determine if the MPG of our Protege will qualify for the Voucher – will there be a list of eligible cars or something? Or will we need to ‘prove’ the MPG somehow?

  • FamilyGuy

    Nice math Stan!

    Why do Americans use MPG instead of Litres/100 km? The same reason why the United States still uses degrees F, yards, feet, inches, miles, and pounds. It’s just silly and wrong. I can’t tell you why we didn’t switch over with the rest of the world.

  • Helpful

    ChicagoGal,

    The easiest way to figure out your MPG is to check out fueleconomy.gov and look up your car. It goes all the way back to 1985.

    Take care!

  • Shines

    I’m sure (I hope) they’ll take care of this in the details but my 2001 4 cyl Camry would not qualify, but I did a quick Autotrader search and found an ’89 Lincoln going for $750. I’ll buy it and drive it to the Ford dealer to trade for a Fusion hybrid and get the $4500 clunker rebate, then I can sell my Camry myself…

  • Mr Bailout

    Shine…you won’t be able to buy that clunker and trade it in. The bill stipulates that the car has to be registered and owned for over a year to qualify

  • Charles

    The worst MPG for a 1995 or 1994 Protege is 20 city, 26 highway and 22 combined. Which means no help for you. Now if you had been a good boy and bought a 1995 Chevrolet Suburban at 12 MPG, you could get a $4,500 trade in.

    What a crock. You could get a new Ford Focus for about $11,000 if you had bought the Suburban. If you want power, buy a 2009 V6 Fusion and get a nice chuck of change from the government.

    I like the idea of getting these old gas guzzlers off the road, but not by rewarding past bad behavior.

  • Ronald

    I see that the trade in, is required to have been legally registered in your name for at least a year, but what I really want to know is if these clunkers have to be in road worthy, running condition, or exactly what condition qualifies? Also, does the license plate have to be in current, active status or would an expired tag qualify? What MPG data are they going to recognize for the trade qualifications?

  • Samie

    Here’s where I have problems with this program, lets think about a old vehicle, it will retain a better resale value now because of this program. Would a car dealer add 500 to 1,000 to a trade-in vehicle? (The vehicle being purchased) This could mean that working class families may have to pay more for transportation, please don’t tell me they should all ride a bus, everyone should have equal opportunities for mobility. Anyways 2004-2008 used cars will also see a higher resale value so dealerships may not give lots of incentives for 2004 & up used cars. I’m assuming this program includes trade-in for a used car, not just a new 09 or 10 vehicle???

    The program should require ownership of a 18mpg or less vehicle to be 2 or 3 years not one year. That way there is a slight reduction in the kind of thinking that Shine points to. The flip-side is that 1 year reduces the incentive to hold on to older cars & wait for the rebate. Also I’m not sure this program is intended to have incentivies for consumers to purchase the most fuel efficent vehicles but my opinion is that it is mostly geared towards helping the auto industry get rid of backed-up inventory. (I should point out that, like others said MPG’s maybe the wrong way of think about this but we are stuck with that calculation for the near-future)

    Also maybe to reduce some problems the program may want to only address SUV’s and full size trucks instead. Not sure what will happen and maybe I’m overstating the downside to this program but some car dealers are very shady and will do about anything to cheat the system or consumers. Let’s hope its a success and not a scam to consumers.

  • moishe k

    How much will we pay to for a whole team of inspectors to enforce all these stipulations ?

  • vcorcl

    ChicagoGal,
    Sorry, based on the fueleconmy.gov, you 95 Protege is not eligible for rebate, neither do my 99 Protege :(

  • moishe k

    fueleconmy.gov shows estimated new car MPG
    drive 100,000 miles MPG is down emissions are up

  • otter

    I really think the government should stay out of this. There is always the problem of unintended consequences. So the taxpayers are going to pay for a lot of people to trade in their old SUVs for a great deal on a smaller car. Right now I can’t afford to get a new car, even with a great discount. Why should my tax money go to someone who can? I’d rather keep some of my tax money to be able to afford another small car like the one I already drive!

  • tdobson66

    I have a 1996 mazada mpv and would love to trade in this car and get some cash to buy a new car…How do i apply for this? can anyone help me….Would really appreciate it thanks Tim Dobson from Boston Ma.

  • Charles

    It is not yet law, so there is nothing you can do today.

    If your MPV is worth $1000 trade in and gets 17 MPG, and you want a Mazda 5 (about $20,000) at 23 MPG, you could get $3500 for your MPV. So the program will save you about $2500. If you get a Ford Fusion S (about $21,000) at 27 MPG you could get $4500, or save $3500.

  • FordFusionMan

    Hmmmm….. So we have to have had a clunker registered in our name for at least a year? How long will the bill last? I’ll go out and buy an nice 15 year old clunker today, and get a nice $4500 rebate a year from now….

    (you think I’m joking, don’t be so sure..)

  • smartornot

    Well, if it requires a year of ownership, I would certainly hope that its only good for a year…or there will be a problem.

  • r. degnan

    LESS THAN 18MPG?????? i have a 2000 taurus, 17 city, 25 highway. do i qualify or is it mpg average, 21 mpg.

  • Todd1964

    Here is a link to check if your vehicle is eligible as far as mileage requirements as listed for “combined” average mpg. http://www.fueleconomy.gov.

    Also, in regards to running out and buying an old clunker to take advantage by holding on to it for a year, the incentive expires when 1 million vouchers are gone.

    Also, as I understand it, the way it would work is trading it in to the dealership and then the dealership gets the money from the government when the voucher is sent and proof of recycling (demolition) has been received. They will not be allowed to resale the vehicle.

  • BDMARTIN

    The EPA has a website which provides their mileage ratings for automobiles. I was hoping that my 1994 BMW would qualify but I’m a couple of points too efficient.

  • John K.

    What if your car is not listed at http://www.fueleconomy.gov?

    I’ve got a 1996 Buick Riviera w/supercharger. It list only a non-supercharged one for 1995, it does not list any Rivieras for 1996, but in 1997 it list both supercharged and non for Riviera.

    If they go w/the 1997 supercharged model’s numbers, the “New EPA MPG” figures are 16 city, 24 hwy, 19 combined. If they use the city figure, I’m good to go (buy a hybrid)! But if they use the “combined” figure, I’ll be keeping this gas-guzzler for awhile longer. :-(

    IMO, the House and Senate should combine their bills by making the rule something like “an increase of at least 4 mpg or 25%, whichever is greater,” and move the maximum mpg allowed to qualify up to 20 mpg.

  • Todd1964

    John,

    As I understand it, the “combined average” is what is used to determine eligibility. Like you, I also believe that a minimum of 25% increase in mpg’s should be required. Also, I do not think they should put any “combined mpg” requirements on the “clunker or trade-in” as any increase in mpg’s helps (as long as it is 25% or more increase).

    The Senate has two bills before them. The House version that was just passed and their own version, which has higher mileage requirements for the new vehicle vs trade-in. The problem with the higher mpg version is it benefits foreign based manufacturers over domestic as they have more choices in fuel efficient vehicles.

    Also, Edmunds.com has some interesting things to look at on this cash for clunkers deal. They also have a link to track the progress and what vehicles are eligible or viable as per their data on mpg’s and true market value.

  • flash-spyder

    Exactly correct! There is way more advantage to improving, even a little, poor performing cars than good performing cars. If gallons per 100 miles were used as the standard rather than miles per gallon, this would be more obvious. Going from 18 mpg to 28 mpg saves twice as much gas as going from 34 mpg to 54 mpg … not intuitive, but true, just like the example above. So the incentive — to have the most affect — needs to concentrate on the 18 mpg or less cars. However, there is another factor not considered — it takes energy and generates carbon to create a new car. The lowest number I have found is 25,000 miles and the highest is 80,000 miles. This means that it takes that many miles of driving to use the energy and generate the carbon it takes to create the car. If a clunker is replaced and scrapped and the replacement gets 20% better mileage than the clunker, it will take anywhere from 100,000 to 320,000 miles to save enough energy and carbon to overcome the costs of creating the car. If it is 50% better we are still talking 50,000 to 160,000 miles just to break even. But, the government now owns GM and Chrysler (along with the unions). This is more about car sales than it is about saving gas — this will generate 500,000 new car sales and this will help GM and Chrysler a lot (and hence the government and unions).

  • Human

    I do understand the importance of 18 MPG as a limit to maximize the gain. But it just sucks really bad when the car that you want to trade in has exactly 19 MPG combined.

    The part I don’t quite understand is what happens to the clunker? From an earlier post, the impression I got is that the clunker is NOT traded in but rather exchanged for the 3500 or 4500 dollars. I.E. I would go to the dealer to BUY a new car and then simply give my clunker to some place and they give me the money. So basically this would not work for a newer SUV because the trade in value of the SUV is higher than what you can get from the incentive.

  • Farnham

    Where can I find the Combined MPG for my 2000 GMC 1500 ??

  • moishe k

    where R the minivans ?
    we have hybrid & compact cars
    Hybrid & diesel pickups & SUV

    No fuel economy gain on minivans in years

  • Wayne Perry

    This will work perfectly for our family.

    3 months ago we bought a 2nd vehicle for my lawn business. It is an 84 F-150 work truck with a big V-8. I avg between 8-10 mpg. We will be able to afford to buy a vehicle capable of averaging 27 mpg by switching vehicles with my wife and her getting a more sensible vehicle.

    Kudos to all those elected to office. Your job is one of the few where you can’t please all the people all the time. I pray for you all to make a decision that you feel comfortable with and that you feel will best lead our AWESOME country.

  • Rick D

    Nope, you need to have own it for a year.

  • John K.

    Thanks for the replies.

    Re. hybrid minivans: Honda’s minivan (or at least the one they offered years ago) used the same engine and transmission as the Accord. Back when they offered an Accord hybrid, I thought they really missed the boat by not putting that engine/motor and transmission in their minivan and becoming the first in the world to offer a hybrid minivan. The “eco-conscious” soccer moms would have LOVED it!

    Instead, Honda marketed the hybrid in the Accord as an “electric supercharger.” Why, please tell me (rhetorical), if they were going after the sports segment, did they only offer it in the 4-door version of the Accord? Major mistake. They sent mixed messages as to what it was and it was one of Honda’s few failures.

  • Jdc

    If you want to get old gas guzzlers off the road why stop at 1984? I have a 1979 ltd that gets 14 mpg it does not qualify GO FIGURE

  • Anonymous

    You made need to change country.

  • spensorbon

    We are Americans of many generations. Americans measure in ‘ ” & gallons. May need to move.

  • Janice Berlin

    Does anyone know where I can buy a piece of junk car for $500, drive it to the scrap yard and use my $4500 taxpayer gift for my new car? This is a ridiculous idea. It would make more sense if it required people to buy cars that get at least 30 mpg but oh, wait a minute, there really aren’t very many because the car manufacturers were idiots all those years and the stupid Congress was too scared to require higher fuel standards. What a bunch of weenies!

  • Ben

    Is the “Combined MPG” set forth by the EPA remotely accurate?

    I drive a fairly well maintained 1992 Plymouth Acclaim, 3.0 V6. I average around 20MPG HWY and 15MPG city–down to 10-12MPG in winter months. The federal fuel economy website said my Combined MPG is 21–I surely do not believe it, as I have only achieved 21+MPG once in my life–Long distance trip cruising at 55MPH.

    Any thoughts?

  • moishe k

    C how much U can trust uncle ScAM

  • moishe k
  • Shane Williams

    no. the deal only runs till november 1st, 2009. its just, by the time they get it settled, it will be around late july. so you have about 3 months for this. and that its.

  • Anonymous

    The deal only runs through November 1st, 2009

  • bikechain

    Shines, you need to have had the car registered for a year before you qualify for credit. The deal ends Nov. 1, sorry dude try your scam somewhere else. Let the rest of us utilize a decent program.

  • theBeetleElectric

    EXACTLY What ‘John’ said in previous comment…

    IMO, the House and Senate should combine their bills by making the rule something like “an increase of at least 4 mpg or 25%, whichever is greater,” and move the maximum mpg allowed to qualify up to 20 mpg.

    The current mpg standards to qualify to participate in the ‘Cash for Clunker’ trade in program disqualify so MANY that should and, more importantly, WOULD trade up to a hybrid or true ‘alternative fuel’ vehicle. Not that a gasoline powered car that can get over 40 mpg is anything to scoff at.

    But the whole point to this, to me, should be to move the US closer to kicking it’s addiction to fossil fuel.

    Regardless of whether the motivation is to help bail out the auto dealers, or reduce gas consumption… the qualifying standards should have been based on percentage of fuel economy Gained, instead current epa mileage rating.

    btw – I’ve been one of the good guys – Always consciencious about driving a vehicle that is as economical as I can afford. I’ve been driving a little Mitsubishi Expo, 2wd compact car. It used to get almost 24mpg comblined driving. But it’s going on 16 years old and I’m lucky if I can get 20 combined now. I want to replace it, and Need to replace it. But according to the current qualifying ‘mileage standard’ for the make and model of MY Mitz… It’s listed at 20 mpg. Which is 2 mpg too high to qualify for ‘Cash for Clunkers’ program.

    Makes me feel like I’ve been kicked in the stomach for being green, and good all these years. ;-(

    Beetle

  • Carl

    Why dont they use the clunkers for people who could use them instead of crushen them? I thought is was about recycling them. Some of the less fortunate people could these to get back and fourth to thier low paying jobs!

  • Shane

    I just finished buying a car with a cash for clunker car. But Im getting a sick feeling in my stomach now. During the sales process I mentioned that I had a gap in the registration because I was switching states and it wasnt going to pass inspection due to emission stuff. So I waited about 4 months and got it to pass state inspection in the new state after $2000 into it, and got it registered. I have had continuous insurance on it for over 4 years. The sales person said it was ok and not to worry. I got the paper work finished, turned in my clunker, got a check for the loan and now everything is fine and everyone seems to be happy. After reading online, I got the sick feeling it will come back to haunt me. I called the sales person and explained the situation again and asked for a letter from them saying everything was ok and they are ok with my clunker. She said thats find and will send me one and make sure everything is ok. Anyone want to put my mind at ease or tell me I need to return it ASAP????

  • arthurarnold

    Those who ignore the effects of long run trade deficits may be confusing David Ricardo’s principle of comparative advantage with Adam Smith’s principle of absolute advantage, specifically ignoring the latter. Electricians in Huddersfield

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