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Car Allowance Rebate System (CARS) or Cash For Clunkers Program Kicking Into Gear

By • Jul 14th, 2009 • Category: Clean Car Talk Daily Snapshots

Note to readers: Beware of scams already popping up to take advantage of the CARS of “cash for clunkers” program. Never give out personal information on a website, especially your social security number. Your only trusted source should be www.cars.gov.

Updated 07-28-09. The Car Allowance Rebate System (CARS,) or “Cash For Clunkers” program as some in the press like to call it, is the federal program that helps consumers purchase a new, more efficient vehicle when an older, less efficient vehicle is traded in. All transactions made on or after July 1, 2009 are eligible under the CARS program, and many dealers have already registered with the National Highway Traffic Safety Administration (NHTSA) to offer these credits directly to consumers.

The credit received by consumers will not be treated as reportable income for tax purposes. In other words, it is tax-free. Dealers, on the other hand, will have to report it as an income.

The Facts

Here’s a quick run-down of important things about the CARS program you should know, from the government’s official website www.cars.gov:

  • Your vehicle must be less than 25 years old on the trade-in date
  • Only purchase or lease of new vehicles qualify
  • Generally, trade-in vehicles must get 18 or less miles per gallon or mpg (some very large pick-up trucks and cargo vans have different requirements)
  • Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in
  • You don’t need a voucher, dealers will apply a credit at purchase
  • Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
  • The program requires the disposal of your eligible trade-in vehicle and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

Here are some specific requirements of the CARS program:

  • Your trade-in vehicle must
    • have been manufactured less than 25 years before the date you trade it in
    • have a “new” combined city/highway fuel economy of 18 miles per gallon or less. Use this site http://www.fueleconomy.gov/feg/sbs.htm to find your car’s combined city/highway fuel economy. It’s the red mpg number under the red banner “Estimated New EPA MPG” in the graphic below. UPDATED 07-28-09: You now need to find your eligibility here: http://www.fueleconomy.gov/feg/CarsSearchIntro.shtml
    • be in drivable condition
    • be continuously insured and registered to the same owner for the full year preceding the trade-in
    • The trade-in vehicle must have been manufactured not earlier than 25 years before the date of trade in and, in the case of a category 3 vehicle, must also have been manufactured not later than model year 2001
    • Work trucks and cargo vans have different requirements
  • Consumers can either buy or lease a new car, as long as the lease period is at least for 5 years. Used cars are eligible.
  • Both domestic and foreign made cars are eligible.
  • The manufacturer’s suggested retail price for the new car cannot exceed $45,000.
  • New passenger cars to be purchased must have combined fuel economy of 22 mpg; Category 1 or class 1 trucks (up to 6,000 lbs GVWR, Gross Vehicle Weight Rating,) 18 mpg; Category 2 trucks (6,001 to 10,000 lbs,) 15 mpg; and Category 3 trucks (10,001 to 14,000 lbs), no specific minimum mpg requirements but other restrictions apply.
  • The law requires your trade-in vehicle to be scraped (destroyed.)

The Upsides

So what are the amounts of the credit and how are they determined. Purchasers of new qualified cars are eligible to receive either $3,500 or $4,500 credit.

  • $3,500 credit. Consumers receive this amount if the new car’s combined mpg is at least 4, but less than 10 mpg, higher than the old car’s.
  • $4,500 credit. Consumers receive this amount if the new car’s combined mpg is at least 10 mpg higher than the old car’s.

I’m sure many consumers will jump on this deal because these are some very attractive discounts on top of any other discounts, incentives and special offers made available by dealers and manufacturers. Expect dealer showrooms to have increased traffic between now and November 1. Also expect to see fewer polluting cars on the roads.

The Downsides

So is there a downside to this law? I can think of at least a couple.

One, low income people won’t be benefitting from the Cash for Clunkers program because they can’t afford a new car anyway. Not surprisingly, they are the largest population driving clunkers.

smart cars program3 Car Allowance Rebate System (CARS) or Cash For Clunkers Program Kicking Into GearTwo, the charity industry (which is very active in the older car sales and auction trade) will probably lose out because traded in cars (all of which are still operational by law) will all head for the scrap yards. As environmentally undesirable as they are, some poor families can still use them to maintain their livelihood. So again the poor lose out.

For  the latest information on the CARS program, follow this link to view helpful Q&As for consumers.

By the way the smart fortwo also qualifies for this “cash for clunkers” program.

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Tagged as: cash for clunkers, fuel economy, miles per gallon, mpg, national highway traffic safety administration, smart, smart fortwo

is a marketing communications consultant working in the San Diego area. Cuong is dedicated to helping individuals and companies maximize their presence on the Internet and efficiently take products and services to market through SEO and network marketing. Cuong also maintains a blog on Marketing at marketingautopsyblog.com. You can also find Cuong Huynh's profile on LinkedIn. For fun he maintains a blog on Vietnamese pho, soccer and do storyboards for movie and film projects. Follow Cuong on Twitter @CuongHuynh, @LovingPho, @CleanCarTalk, @BlockbusterFilm, @SoccerUSA.
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