How to Cash Your Clunker
After weeks of debate and legislative gamesmanship—several versions of this bill have been passed or voted on in both houses of Congress, with lawmakers eventually attaching it to an unrelated military funding bill—”Cash For Clunkers” is finally one step away from becoming law. Officially called the Consumer Assistance to Recycle and Save Program (CARS), the law made its way to President Obama’s desk yesterday, backed by $1 billion in funding that is designed to stimulate the sale of 250,000 new cars and trucks in the next year.
The bill has plenty of critics on both sides of the aisle. Not as many people will be eligible to benefit as would under previous versions, and the required fuel efficiency improvements are minimal. But for those driving true relics and dealing with rising prices at the pumps, an extra few thousand dollars on top of the steep discounts dealers are already offering may finally make this the right time to buy or lease a new car.
How to Take Advantage
In order to take advantage of this incentive, you need to own a vehicle with relatively low fuel economy. For cars and minivans, that means an 18 mpg or less EPA combined city/highway rating. For SUVs and light trucks that number is 16 mpg—large light-duty trucks weighing over 6,000 pounds must get less than 15 mpg.
Depending on how much mileage improvement the trade-in nets, consumers will receive vouchers for $3,500 or $4,500.
Passenger Car or Minivan:
$3,500 Voucher: New vehicle must be a 4 mpg improvement.
$4,500 Voucher: New vehicle must be a 10 mpg improvement.
$3,500 Voucher: New vehicle must be a 2 mpg improvement.
$4,500 Voucher: New vehicle must be a 5 mpg improvement.
Getting the money
The CARS program isn’t a tax deduction or rebate—nor is it something that you have to spend the day at the DMV filling out paperwork to get. All of the work will be handled by car dealerships and the government, so all you have to do is turn in your clunker—along with its title, registration, and insurance papers. After the government verifies that everything is in order, a credit will be sent to the dealership which will pass the money on to you in the form of a discount.
Much of the criticism of the program leading up to its ratification came from skeptics who were concerned that a whole new market for junk cars would emerge from those looking to pay $1000 for a car they could later trade in for $4500. The final legislation has ensured that those fears won’t become a reality.
All trade-ins must have been owned and insured by their current owner for at least a year and be in working order. For now, the program is designed to last only one year, making it pretty much impossible for prospective buyers to con the system.
Act sooner rather than later
Initially the CARS program was slated for as much as $4.5 billion in funding, which would have allowed more than a million vouchers to be issued. The trimmed down version that currently awaits President Obama’s signature is expected produce only around 250,000 vouchers, meaning that all of the money could be gone quick depending on how much interest the program generates.
While it is possible that more funding could come further down the line, given the struggle that this bill faced to even get passed and the host of budgetary commitments facing Congress and the Administration, don’t hold your breath.
Fuel-sippers need not apply
If your old car already gets decent fuel economy, you’re out of luck. The clunker needs to suck down fuel at a rate of 18 miles to gallon or worse.
You don’t have to buy
The incentives apply equally whether you purchase or lease.
No Tesla Roadsters or other high-end vehicles
New cars whose sticker prices exceed $45,000 are ineligible for the program no matter how eco-friendly they may be.
SUVs for cars okay
Provided that the old and new vehicles qualify for the trade-in within their class, consumers can upgrade an SUV for a more fuel efficient car, or vice-versa.
Only cars produced during or after model year 1984 can be traded in.