Cash for Clunkers Car Buying Stimulus Bill

Cash for Clunkers FAQ


For a list of vehicles eligible for the Cash for Clunkers rebate:
Click here to see eligible new vehicles you can purchase
Click here to see eligible used vehicles you can trade in

Cash for Clunkers — now officially known as the Car Allowance Rebate System (CARS) — is a federal program passed by Congress and signed into law by President Obama on June 24. The program is meant to encourage consumers to trade in older, less fuel-efficient vehicles for new vehicles that get better fuel economy by providing a credit worth up to $4,500. Modeled after several programs that have already been successfully implemented in Europe, the program is expected to begin on July 23 and end on November 1, 2009.

Though final details of the program are still being hashed out by the folks at the National Highway Traffic Safety Administration (NHTSA), below are details of the Cash for Clunkers program as we know them today. The program would offer a credit that allows consumers to save from $3,500 to $4,500 on a new-car purchase. There are also various credits for trucks and work trucks.

The program divides cars, trucks, SUVs and minivans into several categories, in most cases based on weight and size of the wheelbase. Vehicles that are traded in are to be crushed, not resold, and the sticker price of the replacement vehicle they purchase is not to exceed $45,000. Miles-per-gallon figures below refer to the EPA's "combined" mpg window sticker values.

Consumers should know that in cases where your used car is worth more than $4,500, this bill will probably not make financial sense for you.

Cash for Clunkers at a Glance

Do I Qualify for the CARS Program?
What Are the Vehicle Requirements?
If my current vehicle is a... Then the new vehicle I buy must be a ... My new vehicle must get at least this mpg (combined)* But also improve the mpg by... The credit I can get is...

Passenger Automobile

- All passenger cars

Passenger Car 22mpg 4-9 mpg $3,500
10 mpg or more $4,500
Category 1 Truck 18mpg 2-4 mpg or more $3,500
5 mpg or more $4,500

Category 1 Truck:†

- SUVs (Chevy Tahoe, Honda CR-V, etc.) with a GVWR of less than 10,000 pounds
- Pickups with a GVWR of less than 8,500 pounds and a wheelbase of 115 inches or less (Ford Ranger, Toyota Tacoma, etc.)
- Passenger vans and cargo vans with a GVWR of less than 8,500 pounds and wheelbase of 124 inches or less (Dodge Caravan, Toyota Sienna, etc.)

Passenger Car 22mpg 4-9 mpg $3,500
10 mpg or more $4,500
Category 1 Truck 18mpg 2-4 mpg $3,500
5 mpg or more $4,500

Category 2 Truck:†

- Pickups with a GVWR of 8,500 pounds or less and a wheelbase greater than 115 inches (Ford F-150, Chevy Silverado, etc.).
- Passenger vans and cargo vans with a GVWR of 8,500 pounds or less and a wheelbase greater than 124 inches

Passenger Car 22mpg 4-9 mpg $3,500
10 mpg or more $4,500
Category 1 Truck 18mpg 2-4 mpg or more $3,500
5 mpg or more $4,500
Category 2 Truck 15mpg 1 mpg $3,500
2 mpg or more $4,500

Category 3 Truck:†

- Trucks w/ GVWR 8,500-10,000 pounds that are either pickup trucks with cargo beds 72 inches or longer or very large cargo vans.

Category 2 Truck NA‡ NA‡
However, the new vehicle must be similar in size or smaller than the trade-in
$3,500
Category 3 Truck

Source: National Highway Traffic Safety Administration, Day One Notice
*MPG requirements are based on EPA's combined city/highway rating
†GVWR = Gross Vehicle Weight Rating
‡Not Applicable; Category 3 trucks do not have EPA MPG ratings

Basic Eligibility Requirements
Trade-in Vehicle

- Is in drivable condition
- Has been both continuously insured, consistent with the laws of your State, and continuously registered to the same owner for at least one year immediately prior to the trading-in of your vehicle under the CARS program
- Manufactured less than 25 years before the date of trade in (i.e., before mid- to late-1984) and, in the case of category 3 trucks, not later than model year 2001
- Has a combined MPG of 18 or less (this does not apply to category 3 trucks, i.e., very large pickup trucks and cargo vans)

New Vehicle
(Purchased or Leased)
- Is new (i.e., legal title has not been transferred to anyone)
- Has manufacturer's suggested retail price of $45,000 or less

Description of Vehicle Categories

Passenger cars: The old car you would like to trade in must have been manufactured in 1984 or later, and must get 18 mpg or less city/highway combined. If the mileage of the new car is at least 4 mpg higher than the old vehicle, the credit will be worth $3,500. If the mileage of the new car is at least 10 mpg higher than the old vehicle, the credit will be worth $4,500.

Category 1 Trucks: These are all SUVs (Chevy Tahoe, Toyota RAV4), minivans (Dodge Caravan) and small pickup trucks such as the Chevy Colorado and Toyota Tacoma. The old vehicle you would like to trade in must have been made in 1984 or later, owned, insured and operated by you for one year, and must get 18 mpg or less city/highway combined. If the mileage of the new vehicle is at least 2 mpg higher than the old vehicle, the credit will be worth $3,500. If the mileage of the new car is at least 5 mpg higher than the old vehicle, the credit will be worth $4,500.

Category 2 Truck: These are full-size pickup trucks such as the Ford F-150 and Toyota Tundra, and full-size vans such as the Ford Econoline. Versions of these trucks and vans that earn an EPA combined rating of 15 mpg or better are eligible for a credit. If the mileage of the new truck is at least 1 mpg higher than the old truck, the credit will be worth $3,500. If the mileage of the new truck is at least 2 mpg higher than the old truck, the credit will be worth $4,500.

Category 3 Truck: These are full-size heavy-duty work trucks such as the Ford F-350, F-450, etc. Under the agreement, consumers can trade in a pre-2002 work truck (any pickup truck or cargo van with a Gross Vehicle Weight Rating from 8,500-10,000 pounds) and receive a credit worth $3,500 for a new work truck in the same or smaller weight class. There will be a finite number of these credits, based on this vehicle class' market share. There are no EPA mileage measures for these trucks; however, because newer models are cleaner than older models, the age requirement ensures that the trade will improve environmental quality. Consumers can also "trade down," receiving a $3,500 credit for trading in an older work truck and purchasing a smaller Category 2 truck weighing 8,500 pounds or less.

Cash for Clunkers FAQ

How much are the credits worth? This will depend on the car you are turning in and the type of car you buy. In general, if the improvement in fuel economy between your old car and the car you buy is 10 mpg (combined highway mileage according to the EPA), the maximum credit will be $4,500. The requirement for improvement in fuel economy for SUVs, pickup trucks and minivans is lower. For specifics, see above.

How will you get the money toward the trade-in? An electronic transfer from the NHTSA to the dealer will be issued once a vehicle is determined to qualify for the Cash for Clunkers program. About 10 days later, the eligible amount would be credited as all or part of the down payment on a qualifying new car.

Can the credits be combined with other manufacturer incentives? Yes, the credit can be combined with incentives such as low interest financing and customer cash back. In some cases this will dramatically lower the purchase price of the vehicle.

How old does my car need to be? Eligible vehicles must be manufactured in model-year 1984 or later. For work trucks, however, any model built before 2002 is eligible. We anticipate that most cars traded in will likely be model-year 2000 and older.

What types of vehicles qualify? The vehicle must have a federal combined city/highway fuel economy of 18 or less miles per gallon. This means that many American-made cars and trucks will be eligible for a credit toward the purchase of new vehicles. The categories of vehicles that will qualify fall into four classes: passenger cars, Category 1 (small pickups/SUV/minivan), Category 2 (full-size pickups and vans) and Category 3 (work trucks with a GVWR between 8,500-10,000 pounds).

What kind of mpg will the new vehicle need to get? Different levels of improvement are required for each type of vehicle. In passenger cars, if mileage is improved by 10 mpg, the $4,500 credit is awarded; if fuel economy is improved by only 4 mpg, the $3,500 credit is awarded. The mileage improvement levels and credit amounts for the different classes of trucks are listed above.

If I trade in a car, truck or SUV, am I obligated to buy the same type of vehicle? Based on what we know, if you have a Category 1 truck or SUV, you can downsize to a passenger car and still be eligible for a credit. The new vehicle must have the improved mpg requirements to qualify. If you refer to our above chart, you can easily see the requirements per vehicle class. Let's say you have a 1994 Jeep Grand Cherokee with the 6-cylinder engine. You've decided that you want a smaller car. The Jeep gets 16 mpg. When you look for a new passenger car, you must find a vehicle that improves on the mpg by 4 or 10 mpg but also gets at least 22 mpg. It must fulfill both requirements. In this scenario, any new passenger car that gets 22 mpg, will qualify you for a $3,500 credit. If you want to qualify for the maximum $4,500 credit, you must find a new car that gets 26 mpg.

The program can also work if you want to get into a slightly larger vehicle. For example, a 1990 Chevrolet Camaro with the V8 engine gets about 18 mpg. You could purchase a Category 1 truck or SUV that gets 20 mpg to get the $3,500 credit. If you want the $4,500, you must find a truck or SUV that gets 25 mpg (2010 Chevrolet Equinox, 2009 Ford Escape Hybrid, 2009 Mazda Tribute Hybrid, to name a few).

Category 2 trucks can be traded in for a Category 1 or a passenger car as long as it meets both mpg requirements.

A Category 3 work truck can only be traded for a Category 2 truck or another Category 3 truck, not a passenger car.

Can I trade in more than one vehicle to get multiple credits? No more than one credit may be issued for a single person. Regardless if an eligible vehicle has joint registered owners, a single credit will be issued. Also, you cannot combine credits. Only one credit can be applied to the purchase of a new vehicle.

Is there a time limit or cap on the number of vehicles? The bill has been funded with $1 billion, and that funding has been approved through November of 2009. Unless additional funding is provided, the program will expire by November. Since there is a funding limit, consumers who are interested in taking advantage of this program should contact a participating dealer as soon as funds become available (this will likely be after July 23). There is a special provision in the bill that requires that no more than 7.5 percent of the funds for the program shall be used for work trucks.

How long do I need to have owned the vehicle I'm trading in? The vehicle must be insured and registered in your name and in use for at least one year.

If I have an older car that is in good running condition, or a classic car, is it mandatory for me to turn it in? No. This program is completely voluntary.

What happens to the car that you trade in? The dealer is responsible for sending the vehicle to a disposal facility. The entire vehicle will be crushed or shredded so that the car does not end up on the road again.

How will this affect used-car values? Since the "clunkers" will be taken off the road, there will be fewer older vehicles in the marketplace. However, our analysts don't expect this program to drastically affect used-car values.

Where do I find the mpg numbers to see if my vehicle qualifies for the Cash for Clunkers credit? The EPA's combined mileage will be used. This is a combination of the highway and city mileage for vehicles. Models prior to 2008 will use the converted mpg numbers which take into account the new EPA testing methods. This information can be found on the window sticker of the car or at fueleconomy.gov.

Although many vehicles will qualify for the program, it may not always make financial sense to trade it in. We've compiled a list of eligible trade-in vehicles that average 18 mpg or less, and have a value of less than $4,500. Here are a few examples:

YEAR MAKE MODEL
1996 Honda Passport
1997 Lincoln Continental
1998 Chevrolet Silverado
1995 Audi A6
1996 Toyota Land Cruiser
View Full List »

When is the program expected to go into effect, and will it be retroactive? The program is expected to go into effect on July 23. It will not be retroactive to any vehicle purchase made before the program goes into effect.

Where will the money for credits come from? The Cash for Clunkers program was attached to a $106 billon war funding bill, of which $1 billion was set aside for the CARS program.

Does the credit augment or replace what the dealer would give me for my trade-in? The money you receive from the Cash for Clunkers program will act as your trade-in value. It's unlikely to be combined with a dealer's trade-in offer since the car you are trading is being crushed and therefore cannot be resold. This program is primarily designed to inflate the value of older vehicles worth less than $4,500.

Is there a limit on the price of the vehicle purchased with Cash for Clunkers credits? Vehicles purchased with the credit must have an MSRP of $45,000 or less.

How will the program be implemented? The new CARS web site provides information on how the program will work. Dealers will be able to obtain vouchers online once you establish the vehicle you are trading in. The Vehicle Identification Number (VIN) will be the prime tool in verifying information on the trade-in vehicle such as model year, engine size and the corresponding EPA-rated fuel-economy levels.

Will it apply to used-car purchases? No.

What if you're leasing a vehicle and wish to trade it in? Though all the final details of the program have been settled, it is unlikely that consumers who are currently leasing vehicles will qualify for this program.

What if you wish to lease the new vehicle? In this case, it appears likely that the credit could be applied to a leased vehicle as a "capitalized cost adjustment." This would lower the price of the vehicle and thus reduce the monthly payment of a lease. In order for a lease to qualify, the term must be for no less than five years. However, we don't recommend getting into a five-year lease because of the additional costs.

Do I need to give out any personal information to sign up for the program? No. Beware of fraudulent "Cash for Clunkers" sites fishing for your personal information. The only official site for the CARS program is cars.gov. There is no need to give out your personal information over the Internet to qualify for the program.

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