FAQ about the "Cash for Clunkers" program

It’s everywhere you look. “Cash for Clunkers”, or the CARS program, has officially become a hit. Of all of the provisions of President Obama’s stimulus package, this program has unquestionably been the most popular. Most people know the basics, but the specifics can be very confusing. Hopefully, this blog will help some readers find some answers about the CARS program.

Q: How do I know if my old car qualifies as a “clunker”?
A: Any car or light truck that has been rated at less than 18 miles per gallon of fuel efficiency should begin to qualify. It is important to note that the ratings for older cars have been adjusted by the government to meet current standards. To see if your car qualifies, check www.fueleconomy.gov

Q: “Begin” to qualify? What other requirements do I have to meet?
A: Besides the fuel efficiency test, there are several requirements. You must have owned and insured the car for not less than one year. The car must have been manufactured after 1984. The car also must be drivable. Finally, you must have clear title to the car.

Q: What about income? Do I have to qualify financially?
A: No. This program is available to everyone regardless of how much or how little they make.

Q: What kind of car can I buy?
A: You have to buy a new car. It doesn’t matter if the car is foreign or domestic, but the sticker price cannot exceed $45,000. The new car must also meet certain fuel efficiency requirements.

Q: What are the efficiency requirements for my new car?
A: They are based on the difference between your old car and the new one. If the new car gets 4-9 miles per gallon more than your old car, you will qualify for a credit of $3,500. If the new car is 10+ miles per gallon better, you will qualify for $4,500. The thresholds are slightly lower for pickup trucks and small SUVs.

Q: Can I lease the new vehicle, or do I have to purchase?
A: Leasing is an option, but the lease term has to be at least five years and there can be no balloon amount at the end of the lease.

Q: When can I expect to get the rebate check?
A: You don’t. The dealer gives you the price break as a “trade in allowance” when you make the deal for the new vehicle. The dealer will then apply to be reimbursed by the government.

Q: So if it’s really a guaranteed trade in allowance, what if my vehicle is worth more than $4,500? Can I get extra from the dealer?
A: No. This program is intended to provide incentive for people to get really old cars off the roads. The dealer is not allowed to provide any additional trade in allowances for cars under this program. If your vehicle is worth more than $4,500, you’re not going to see any benefit from this program.

Q: What about other incentives from the dealer? Are they allowed?
A: Any other dealer incentive - such as rebates, discounts, or matching funds - are allowed under the program.

Q: Which dealers are participating?
A: A complete list can be found at http://www.cars.gov/dealer/

Q: What happens to my old car after I trade it in? Can I buy it back?
A: No. Any car taken in under this program has to be disabled by the dealer and turned over to the scrap yard for destruction. They don’t want these showing back up on the road.

Q: Can I trade in two “clunkers” and get $9,000 toward a new car?
A: The law reads that only one vehicle per registered owner can be traded in under this program. If more than one registered owner is listed, only one credit will be issued.

Q: Will I be taxed on the amount of the credit?
A: No. The act that creates this program specifically states that it is not to be taxed to the consumer.

Q: When does this program expire?
A: The law says November 1 or when funding runs out. The initial funding has already been exhausted - in less than a week. Congress is working on passing additional funds for the program -the House passed it on Friday and the Senate was working on it today. As popular as the program has been, my best advice is to take advantage as soon as possible.

--Dan Musick