The nuts and bolts of the Cash for Clunkers program
The car allowance rebate system known as Cash for Clunkers is one of President Barack Obama's pet projects. It's designed to boost cars sales and get old, polluting vehicles off the road.
But like any government program, there are lots of rules.
It's the cash-back program that's been hyped for months. Uncle Sam wants to help you ditch that old gas-guzzler and get a new, more fuel-efficient vehicle.
Most of us know the hook -- get up to $4,500 for that old clunker. But few know the specifics.
To qualify for the program, both your old vehicle and your new one must meet several conditions. There are different rules for cars, SUVs, pickups and full-size trucks.
Let's look at cars.
Your trade-in must:
- be a 1984 or newer model
- have a combined mileage of 18 mpg or less
- be in drivable condition
- have been continuously insured and registered for at least a year prior to trade-in
The vehicle you buy or lease:
- must be new
- have an MSRP of $45,000 or less
- get 4 miles per gallon more than the old vehicle to get a $3,500 credit
- get 10 miles per gallon or more than the old vehicle to get a $4,500 credit
All of the clunkers must be crushed, so these vehicles have no trade-in value.
"If your vehicle is worth more than $4,500 and you want to get rid of it, the best thing to do is sell it," said Jack Gillis, author of The Car Book. "Or simply trade it in and not take advantage of the Cash for Clunkers program."
The other thing you need to consider: do you really need a new car?
"A big mistake many consumers may be making it thinking like this is free money and going out and getting a bigger loan, buying a more expensive car, and getting themselves further in debt when they really don't need to when their current car is running fine," Gillis said.
The feds plan to release all the final rules for the Cash for Clunkers program On Friday, but I can answer the following questions for you right now.
Who submits the paperwork?
That's the dealer's job.
When do I get the credit?
At the time you buy or lease the new vehicle. It's deducted from the bill by the dealer who gets the money from the government.
If I lease a new car, how long does the lease need to be?
Five years, which is a long time for a lease these days.
For more information:
Cars.gov
But like any government program, there are lots of rules.
It's the cash-back program that's been hyped for months. Uncle Sam wants to help you ditch that old gas-guzzler and get a new, more fuel-efficient vehicle.
Most of us know the hook -- get up to $4,500 for that old clunker. But few know the specifics.
To qualify for the program, both your old vehicle and your new one must meet several conditions. There are different rules for cars, SUVs, pickups and full-size trucks.
Let's look at cars.
Your trade-in must:
- be a 1984 or newer model
- have a combined mileage of 18 mpg or less
- be in drivable condition
- have been continuously insured and registered for at least a year prior to trade-in
The vehicle you buy or lease:
- must be new
- have an MSRP of $45,000 or less
- get 4 miles per gallon more than the old vehicle to get a $3,500 credit
- get 10 miles per gallon or more than the old vehicle to get a $4,500 credit
All of the clunkers must be crushed, so these vehicles have no trade-in value.
"If your vehicle is worth more than $4,500 and you want to get rid of it, the best thing to do is sell it," said Jack Gillis, author of The Car Book. "Or simply trade it in and not take advantage of the Cash for Clunkers program."
The other thing you need to consider: do you really need a new car?
"A big mistake many consumers may be making it thinking like this is free money and going out and getting a bigger loan, buying a more expensive car, and getting themselves further in debt when they really don't need to when their current car is running fine," Gillis said.
The feds plan to release all the final rules for the Cash for Clunkers program On Friday, but I can answer the following questions for you right now.
Who submits the paperwork?
That's the dealer's job.
When do I get the credit?
At the time you buy or lease the new vehicle. It's deducted from the bill by the dealer who gets the money from the government.
If I lease a new car, how long does the lease need to be?
Five years, which is a long time for a lease these days.
For more information:
Cars.gov
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