I’ve written quite a bit about the cash for clunkers program here on Bible Money Matters in relation to how the program worked, who qualified for the rebate, and how you could go about redeeming your voucher.

The program has now run its course, and now that the excitement has died down people are beginning to wonder if there are any other consequences to the program, specifically when it comes to their taxes.

Cash For Clunkers And Federal Taxes

Many people were concerned that when it came to their federal taxes they might have to treat the $3500-$4500 voucher as taxable income.  When you go to the government’s website, however, they are quick to dispel that notion.  From the cars.gov FAQ:

Is the credit subject to being taxed as income to the consumers that participate in the program? NO. The CARS Act expressly provides that the credit is not income for the consumer.

Since the credit is not treated as taxable income, you won’t have to pay taxes on the voucher for your federal income taxes.

The question still remains, however, will you have to pay state taxes on the voucher/credit?

Cash For Clunkers And State Taxes

The question of whether you’ll have to pay taxes on the credit for state taxes is a bit more murky. From the cars.gov FAQ:

Do I have to pay State or local sales tax on the amount of the CARS program credit? MAYBE. The question of whether a consumer must pay State or local sales tax on the amount of the CARS program credit depends on the sales tax law of each State or locality. Consumers should review the law of their respective States or consult a tax advisor to answer this question.

So the answer is that  yes, you might have to pay taxes on the credit if your state and local authorities say you have to.   I don’t want to post an entire list here of which states do and don’t count the credit as taxable income, but one of my blogging colleagues put together a pretty good list. You can find it here:

Cash For Clunkers Tax Rules

Other Cash For Clunkers Reading:

• Cars.gov – Government’s Official Website
• More Cash for Clunkers Tax Rules
• Cash for Clunkers Taxes for State
• Cash for Clunkers Tax
• Does Cash for Clunkers Affect Your Taxes?

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Tax Rules And Consequences Of The Cash For Clunkers Program

A few months ago we wrote for the first time about the $8000 first time homebuyer tax credit that the Obama administration passed as a part of the 2009 stimulus bill. The measure was aimed at helping to improve the real estate market that has taken such a huge hit over the past year. They wanted to get the market moving, and get first time homebuyers interested in buying a home instead of just sitting on the sidelines as they have been.

By and large the measure has gotten quite a few people back into the buying process, up to a 1/3 of all sales of existing homes in the past few months have been to first time buyers.  Even so, there are still quite a few people biding their time trying to find the perfect house.  But the time to claim the tax credit may be running out.

$8000 Tax Credit Expires December 1st 2009

The $8000 tax credit is a great deal for people who are first time home buyers.   But let’s review the tax credit and it’s provisions:

• First-time buyers can claim a credit worth $8,000 – or 10% of the home’s value, whichever is less – on their 2008 or 2009 taxes.
• To qualify for the credit, the home must be purchased between Jan. 1, 2009 and Nov. 30, 2009.
• You cannot have owned a house for the past three years to qualify as “first time” buyer. You also must live in the purchased house for at least three years, or you will be obligated to pay back the credit.
• To get the credit, homebuyers have to earn less than $75,000 for singles or $150,000 for couples. If you make more than that you may qualify for a partial credit.

Getting the credit should be pretty easy, just claim it on your return.  One caveat, however.  You have to close on your new house by  November 30th.   That may sound like it’s a long way off, but in reality it’s coming a lot faster than you think.

You may think that you’ll be able to close on your new home right before the November 30th deadline, but you’d probably be wrong. Consider this – according to themortgagereports.com the end of November 2009 will not be a good time to close on your new home:

This is when it starts to get messy.  Check out the calendar.

• November 30, 2009 is the Monday after Thanksgiving Weekend.
• November 28-29, 2009 is a weekend.  No closings on weekends.
• November 27, 2009 is the Friday after Thanksgiving — an unofficial holiday.
• November 26, 2009 is Thanksgiving — an actual holiday. No closings.
• November 25, 2009 is the day before Thanksgiving — a national “half-day”.

So, that backs up the November 30, 2009 first-time home buyer tax credit deadline by 6 days to November 24, 2009 — a Tuesday.

The end of November is thrown for a loop because of the Thanksgiving holidays, and when you’re talking about trying to squeeze in a closing in all that madness, you had better be extremely lucky.   Instead it is suggested that you try and schedule your closing for at least the week of November 16th, just to give yourself some breathing room for things that can often come up in the buying process (problems with the final walk-through, mortgage documentation problems, etc).

Now when you think about closing on a home around November 16th, and considering that normally closings are done 60 days out by default (can be negotiated down in some cases), that means that you would have to put in an agreement on a house by September 16th in order to close on your house in time – that’s only about 3 weeks away!

3 Weeks And Counting To Find Your House!

So this post is a cautionary one in case you’re still considering buying your first home using the first time homebuyers tax credit.    It’s time to get cracking, time to find the house that you want to buy, and time to put in a purchase agreement.  If you wait too much longer, you may find yourself with the short end of the stick and no $8000 tax credit!

Are you considering buying a home using the $8,000 tax credit?  Did you realize that the time to find your new home was so short?   Have you already bought your new house and filed for the tax credit? Tell us about your story in the comments!

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Time Is Running Out To Get The $8000 First Time Homebuyer Tax Credit

We’ve been talking a lot recently about the Cash For Clunkers program, and how the program has been successful by some standards, and troubled in other ways.  The program ran out of money one week after it launched, and was only re-launched after congress passed another 2 billion dollars for the program.

Now the program is beginning to run out of money again.  The Obama administration has announced that the Cash For Clunkers program will end on Monday:

The popular Cash for Clunkers program will end on Monday at 8 p.m. Eastern time, the Obama Administration said Thursday.

As of Thursday, the Administration said the Clunkers program, officially the Car Allowance Rebate System, had recorded more than 457,000 dealer transactions worth $1.9 billion in rebates.

“Applications for rebates will not be accepted after 8 p.m. EDT Monday and dealers should not make further sales without receiving all the necessary paperwork from their customers,” the Administration said in a statement.

The Administration expressed confidence that money would be available to pay all eligible rebates. A total of $3 billion has been allocated to the program.

The Department of Transportation “has been very focused on making conservative assumptions about this program, and it’s precisely why they’ve announced the winddown at this moment,” a senior Administration official said.

The Administration has countered recent complaints of payment delays by saying that many of the applications to the program from dealers have been incomplete and needed additional review or had to be sent back.

Want to take advantage of the program before it runs out?  Don’t forget to read our posts detailing the program, and get to your participating dealer before 8pm eastern on Monday!

• Cash For Clunkers Eligibility
• Common Questions About The Cash For Clunkers Program Answered; FAQ

Also, if you’re signing a deal this weekend, be careful of what you’re signing as some dealers are adding clauses to the contract stipulating that you will have to pay them back for your clunker rebate if the voucher is denied by the government.

Dealers Opting Out Of Cash For Clunkers

In the last week or so a large number of dealers have been opting out of the Clunkers program as they have been having major problems even getting paid for the Clunker deals that they have signed and sent to the government for approval.   In a cash important business like the car business, this could be a huge problem for a lot of dealers.

Some dealers..  already have stopped participating in the $3 billion Cash for Clunkers program. On Wednesday, Transportation Secretary Ray LaHood sought to assure dealers that they will be reimbursed for money they have essentially fronted to customers buying cars.

“They’re going to get their money,” he said.

The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said Wednesday that about half of its 425 members had left the program because they could not afford to offer more rebates. They also are worried about getting repaid.

In the Kansas City area, program delays prompted Randy Reed’s Buick-Pontiac-GMC and Nissan dealerships to stop participating in Cash for Clunkers on Monday. Including a dealership in St. Joseph, Reed said his stores had not been reimbursed yet for about 40 deals.

“It seems like a program the government has mismanaged from the start,” he said. “Our number one goal is not do anything to put ourselves at risk with our customers. None of us can afford the kind of losses we’re looking at if we continue participating and don’t get reimbursed.”

I for one am not sad to see the Cash For Clunkers program go.  The program, while popular (anytime you “give something away” it’s probably going to be popular), has been beset with problems.  The aim of trying to have a positive environmental impact is dubious at best with even environmental groups saying they aren’t impressed. The economic impact isn’t really agreed on either with some experts like Alan Greenspan saying that he didn’t think that the program stimulated the economy. Add to that the fact that the program has probably moved many people into a worse debt situation than they were in previously, and I am actually happy that the program is over!

What do you think?  Are you going to be taking advantage of the program in it’s last weekend?  Are you glad to see the program go?  Do you think all of these dealers with pending deals will get paid, or will the government stiff them? Let us know what you think in the comments!

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Cash For Clunkers Program Is Dead Again. Gas Guzzler Trade-In Program Ends Monday.

More Cash – For Cash For Clunkers

It was only a week ago that we were talking about how the Cash For Clunkers program had only been active for a week, and it was already running out of money.  $1 billion dollars had been assigned to the program and after demand for the vouchers was much larger than anticipated, the program had to suspended.   The government didn’t want people trying to get a voucher that was no longer available.

Now, a week after the program was suspended, Congress has decided,  that the program was such a rousing success, that they should give it another $2 billion dollars.   Last night they approved an extension of the program:

The U.S. Senate approved and sent to the White House on Thursday a $2 billion extension of the “cash for clunkers” autos sales incentive program.

The measure, approved by 60 to 37, extends the successful program that has raised sales of the U.S. auto industry.  President Barack Obama was expected to sign it quickly.

The initial $1 billion of funding approved in June for “clunker” business has generated more than $920 million in rebates and more than 220,000 in auto sales.

Supported by the incentive program, U.S. auto sales overall were down about 12 percent in July from a year earlier, but it was their best performance this year.

A poll was done last week asking a sampling of Americans if they thought the program should get more money.  54% of the respondents said that it shouldn’t.  Despite a majority of people being against the added expenditure, the program will now be continued.

The swift “success” of the program was stunning to a lot of people, and to some degree the government wasn’t ready for the deluge of voucher submissions that happened in the first week.

The administration, stunned by the swift success of the initiative and stung by a series of administrative glitches in trying to process rebates, had warned that the “clunker” measure would be suspended if more money was not approved by week’s end.

The House of Representatives passed the $2 billion extension on July 31. The Senate took a week to affirm that action.

Some senators did introduce amendments to the bill in order to try and kill the measure, but those were soundly defeated – and the program was approved for more money.   So if you had planned on trading in your clunker, you may still have time – but act quick!  Who knows when it will run out this time.  For more details about the program, who is eligible, and what you need to do, check out these articles on our site:

• Cash For Clunkers Eligibility
• Common Questions About The Cash For Clunkers Program Answered; FAQ
  

Not Everyone Is Happy With The Program

Some critics argue that while the program was successful in handing out vouchers to thousands of car buyers, that the program isn’t truly as much of a boon to our economy and the environment as is being suggested.

Groups that aren’t as happy with the program as car dealers?  Mechanics,  scrap yard operators and automotive aftermarket parts dealers.

Who doesn’t like the government’s “cash for clunkers” program? Your mechanic, for one.

Owners of automotive repair shops say the program to help invigorate sales of new cars is succeeding at their expense.

Bill Wiygul, whose family owns four repair shops in Virginia, said he has already had five or six customers decide against repairs. A man who sits on the board of Mr. Wiygul’s bank traded in his car rather than repair it. “He’d been a customer at our Reston store since it opened,” Mr. Wiygul said….

How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check?” he said. “Who picks the winners in this game ’cause obviously the game is fixed.”

So the government is subsidizing one industry (in which it now holds a large stake) at the expense of other small business people like mechanics and repair shops.

The automotive aftermarket, a $250 billion industry that employs about 4.6 million people, could be among the biggest losers in the clunkers program, said Kathleen Schmatz, head of the Automotive Aftermarket Industry Association: “It’s everybody from the Fortune 500 parts manufacturer all the way through the supply chain to the independent repair shop.”

The group that lobbies for independent mechanics in Washington agreed.

“This package will hurt mechanical repairs without question. You are taking older vehicles that are still fine to use and removing them,” said Robert Redding Jr., the Automotive Service Association’s Washington representative. “If you’re taking hundreds of thousands of vehicles that you normally service off the road with no consideration, it hurts people.”

Has The Program Helped The Environment Or Stimulated The Economy?

Even if you dismiss those who have been hurt as having sour grapes, you still need to consider whether the program will actually succeed in it’s aims of helping the environment and stimulating the economy.  So, first, did it help the environment?

Cash for clunkers could have the same effect on global warming pollution as shutting down the entire country — every automobile, every factory, every power plant — for an hour per year. That could rise to three hours if the program is extended by Congress and remains as popular as it is now.

Climate experts aren’t impressed.

Compared to overall carbon dioxide emissions in the United States, the pollution savings from cash for clunkers do not noticeably move the fuel gauge. Environmental experts say the program — conceived primarily to stimulate the economy and jump-start the auto industry — is not an effective way to attack climate change.

So it sounds like the program will have a negligible effect on the environment – especially when you  take into account the scrapping of all the working cars that could have otherwise been kept running for years to come.  How about stimulating the economy?  Alan Greenspan says that while he supports the program, he doesn’t think that it helped to stimulate the economy.

The former head of the Federal Reserve gave a thumbs-up to the cash for clunkers program but said Sunday it is popular only because the economy was on its way back up and not because it was stimulative.

Alan Greenspan said that the program has worked to get people to buy cars and move stock, but he wouldn’t necessarily recommend it as an economic fix.

“It’s an interesting issue. I mean, I have qualms about the concept, but there is no doubt that that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up. If we had been — the clunker program had been put in place six months ago, it would have probably been a dud,” Greenspan said on ABC’s “This Week.”

So the program has been successful in Greenspan’s eyes, but only because the economy was already starting on it’s way to a slow recovery.

Still, the administration and many in congress are hailing the program as a marvelous success, and say that it is one of the main reasons for a rebound that is beginning to happen in our economy.

What do you think about the program? Has it been successful in it’s aims, and was it a good idea?  Or do you side with the critics of the program and think that the program is just another government money drain? (can  you tell which side I come down on?)  Let us know your thoughts in the comments.

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Cash For Clunkers Gets A $2 Billion Cash Infusion And Rises From The Dead.. For Now

The Cash For Clunkers program has only been active since last Friday, but word is now leaking out that the CARS program will be halted at midnight on Thursday July 30th, less than a week after it launched.  The problem?  There are fears that the program may have already run out of money.  The program was to run until November 1st, or until the funds were depleted. It appears the funds have been depleted! From Fox News:

The government plans to suspend its popular “cash for clunkers” program amid concerns it could quickly use up the $1 billion in rebates for new car purchases, congressional officials said Thursday.

The Transportation Department called lawmakers’ offices to alert them to the decision to suspend the program at midnight Thursday. The program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.

The congressional officials spoke on condition of anonymity because they were not authorized to speak publicly. Rae Tyson, a spokesman for the National Highway Traffic Safety Administration, which administers the program, declined comment.

So it seems that the program has been either been much more successful than anticipated, or the government bureaucracy is just too slow to keep up with all of the deals that dealers are sending their way. 

Congress last month approved the Car Allowance Rebate System program, known as CARS, to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers.

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting the suspension.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

“There’s a significant backlog of ‘cash for clunkers’ deals that make us question how much funding is still available in the program,” said Bailey Wood, a spokesman for the dealers association.

So now that the Cash For Clunkers program is suspended, a lot of people who thought they had time to do a deal may not be able to cash in.  The question now is, will congress allocate more money for the program so that more people can take part? Was it successful enough, and did it have the effect that they were hoping?

Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.

“This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn,” Miller said Thursday. “The federal government must come up with more money, immediately, to keep this program going.”

Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with “the congressional sponsors and the administration to quickly review the results of the initiative.”

General Motors Co. spokesman Greg Martin said Thursday the automaker hopes “there’s a will and way to keep the CARS program going a little bit longer.”

Friday morning there is already talk of Congress passing a 2 billion dollar extension to the cash strapped program, and the White House is saying the program will be available at least through the weekend. Read details of that here.

Now that the program may be extended – the question remains. Should it be?  There are already reports of dealers having huge problems getting CARS deals approved, some even being rejected for silly reasons – when the clunker cars have already been destroyed.  That means many dealers will be losing money on those rejected deals because they can’t sell the destroyed cars.  Add to that the fact that the program is a bureaucratic nightmare – with the government not approving deals  in a timely fashion, the government website constantly going down – and the dealers are now extremely worried about cash flow problems.  All of that means you have the making of a huge fiasco.

What do you think? Will the government pass legislation assigning more money to this program?  Will they find that the program has had the stimulating effect that they were hoping?  Is this program just another way for government to waste our money, and will it end up being more trouble than it was worth? Tell us what you think in the comments!

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Cash For Clunkers Program Suspended After Only A Few Days. Here Is Why

Clunkers For Cash Active As Of July 1st

The Cash For Clunkers program has been active as of July 1st, and if you have an eligible car, you can now take advantage of the program.  As a quick refresher, what vehicles are eligible for $3500-4500 voucher?

• Must be in drivable condition.   (That means you can’t tow in that truck on blocks sitting in your front yard)
• Has to have been continuously insured to the same owner for at least one year immediately prior to trade-in. (That means you can’t just go out and buy a cheapo old truck to trade in)
• Manufactured in model year 1984 or later, so 25 year old or newer cars.
• Have a combined fuel economy of 18 mpg or less.  Get anything more than that, and you’re out of luck!

You get either a $3,500 or a $4,500 voucher towards your new car, depending upon the increase in mpg  in old car to new car.  To find out the MPG of your old car vs. a new car, check out this website.

For a video presentation talking about the program, take a look at this video:

Video Detailing The CARS Program From KBB

UPDATE: Some Cars Are No Longer Eligible

If you checked previously to find out if your car is eligible – you’ll want to double check to make sure.  The EPA has revised fuel-efficiency ratings in preparation for the CARS program, and upwards of 100 vehicles had their mileage figures changed.  This means that some vehicles are no longer eligible (while others have now become eligible).

As it prepared for its “cash-for-clunkers” program, the government rejiggered gas mileage figures on about 100 older vehicles last week in a way that changed whether they would be eligible for up to $4,500 in sales inducements.

The Environmental Protection Agency says the changes resulted from a double-check of its fuel-efficiency ratings on more than 30,000 1984 and newer vehicles in advance of the official start of the clunkers program Monday.

About half  of the 100 suddenly did not qualify because their combined mileage rating was revised upward; others unexpectedly got in.

The result of this change?  Some people that had car deals ready to be completed are no longer eligible and are out of luck.  They’re obviously not happy about it.  Be sure to make sure your car is STILL eligible.  *(hat tip to commenter Chris)

Cars Consumer Bill Of Rights

The government website lists a bunch of consumer rights related to the CARS program. I thought I would reprint them here for your reference:

Qualified consumers may participate in the CARS Program between July 1, 2009 and November 30, 2009 on authorized funds are no longer available.

Qualified consumers will receive a credit of $3,500 or $4,500 for an eligible trade-in toward the purchase of lease of an approved vehicle under CARS Program.

Qualified consumers will receive the $3,500 or $4,500 credit at the time they purchase their new vehicle.

Dealers must provide consumers with any other advertised rebates or discounts in addition to the credit they receive through the CARS Program.

Consumers should expect to conduct their deals at their dealership of choice, not on the Internet.

Consumers should expect the dealers to provide their best estimate of the scrap value for their eligible trade-in vehicle. Dealers are allowed to deduct $50 from this value for their administrative costs.

Consumers should expect that all information collected through the CARS Program will be kept confidential. Social Security numbers are not required for a CARS transaction.

Questions That Need Clarification

I’ve posted about the Cash For Clunkers program twice before.

• Cash For Clunkers
• Cash For Clunkers FAQ

In those posts the commenters brought up a lot of good questions about the program.  Here are a few of the more popular ones:

1. Can I trade in one vehicle type for another vehicle type? Yes.  As long as you’re trading it in for an eligible vehicle type, you could trade in a van and buy a car.  Motorcycles are not eligible.
2. Can the person who owns the “clunker”  buy a car for someone else in the family? According to the CARS helpline (866-CAR-7891 (866-227-7891)), you can do this.
3. I have a lease and it is due to expire soon. Does the program apply to leased cars that qualify as “clunkers”? No, leased cars do not qualify as you don’t own the vehicle and can’t turn it in to be destroyed.
4. My car qualifies, but it has a salvage title. Can I still participate in the program? The language of the bill doesn’t exclude salvage titled cars, so as long as the car meets the other qualifications, you should be fine.
5. When does the program actually start? Vehicle purchases are eligible for the CARS program starting July 1st.

As always, please confirm any questions you might have about your car’s eligibility by calling the CARS helpline  at 866-CAR-7891 (866-227-7891)

Alternatives To Cash For Clunkers

There are alternatives to cash for clunkers for those that don’t qualify for the program.   Some are obvious – others not as much.

• Sell your car in a private party sale:  While it may be more hassle, you may end up getting more for your vehicle than if you traded it in for the CARS program.  Even if you don’t, you’ll still probably make something that you can use towards the purchase of a nice used car!
• Donate your clunker: While the government has made doing this not as attractive with recent changes to tax law, you can still claim a deduction on your taxes for the actual sale price of your clunker.  See the donation tax laws here.
• Trade it in:  You can still trade your vehicle in at the dealership if you don’t want to bother with a private party sale.  You may not get as much for it, but you’ll still get something for it -and you can use it towards the purchase of a used car, instead of a new car!
• Keep it: Many people aren’t even considering this option – but why not?  If the car is still running well, you may as well just keep it, and drive it till it dies!  You’ll save a ton of money!

Have you taken advantage of the Cash For Clunkers program?  Was the process handled well at the dealership?  Did you decline to do the deal because you were better off selling or trading your car in? Tell us about your experience in the comments!

UPDATE: The program has been suspended after less than 1 week. Find the details here.

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Cash For Clunkers Voucher Program Is Now Available. Things To Keep In Mind When Trading In Your Gas Guzzler.

Rebates, Tax Credits And Stimulating The Economy

The Obama administration has been giving us all sorts of stimulus packages this year that aim to stimulate spending in troubled sectors of our economy, and jumpstart consumer spending.  First we had the tax incentives for new car purchases, and then the $8000 tax credit for first time homebuyers.  Then we heard rumblings about the $8000 tax credit being expanded to $15,000 (which hasn’t happened yet).

Now the government is about to pass another measure that once again aims to help the struggling auto industry, and at the same time get some less efficient cars off of  the road.   The program is being called “Cash For Clunkers“, or ” Car Allowance Rebate System/CARS“.   The program will cost about $4 billion, and the money is currently proposed to come from Energy Department funding included in the already enacted $787 billion economic stimulus package.  The bill is now simply awaiting the president’s signature to be enacted.

Cash For Clunkers – Car Allowance Rebate System/CARS And How It Works

The aim of the program is to get older less fuel efficient vehicles off of the road.  You trade in your old car or truck  for a voucher towards the purchase (or lease) of a new vehicle that gets better mileage. The better the mileage of the new car, the more money you’ll get towards the  purchase of a new vehicle.

• You get either a $3,500 or a $4,500 voucher, depending upon the increase in mileage per gallon in old car to new car.  To find out the MPG of your old car vs. a new car, check out this website.
• The minimum combined fuel economy of a new car purchased under the program must be at least 22 mpg.
• Small trucks and SUVs have to get at least 18 mpg.
• Large trucks have to get 15 mpg.
• The old cars will be salvaged once they’re turned in.

Here’s a graphic showing the increase in mileage you would need to attain in order to qualify for either the $3500 voucher, or the $4500 voucher. The amounts vary depending upon the vehicle type.

So what cars are qualified to be turned in for the program?

• Must be in drivable condition.   (That means you can’t tow in that truck on blocks sitting in your front yard)
• Have been continuously insured to the same owner for at least one year immediately prior to trade-in. (That means you can’t just go out and buy a cheapo old truck to trade in)
• Manufactured in model year 1984 or later, so 25 year old or newer cars.
• Have a combined fuel economy of 18 mpg or less.  Get anything more than that, and you’re out of luck!

How Do I Participate In the Program?

To participate in the program you just have to buy a new car from a participating new car dealership.  The incentive amount that you qualify for will be applied to the new vehicle’s purchase price.  You won’t receive an actual check or voucher.  The program will run from July 1, 2009 to November 1, 2009.

In order to participate in the program car dealers will have to register with the National Highway Traffic Safety Administration (NHTSA), and it may take a few weeks for a list of participating dealers to be put together, so be patient!  The government will be putting out a new website to give details about the program, and which dealers are qualified to give you the rebate.

When Does It Start?

The Cash For Clunkers Program is slated to take effect as of  July 1, 2009, however, it still needs to be signed into law by President Obama.    When it finally is signed into law the NHTSA will need to work out details of the program and set up a procedure for dealerships to get registered with the program.    When all is said and done it may be a few weeks or more before buyers will be able to participate.

My Thoughts On The Program

To be honest I can’t see how this program will be very effective at any of it’s aims.  I really don’t think there are that many old cars with bad gas mileage on the road anymore.  According to one analysis by Arlington, Va.-based investment bank FBR Capital Markets, the parameters of the “Cash for Clunkers” bill are narrow, and the bill limits eligibility to fewer than 5 percent of U.S. vehicles.   The participation rate in the program is probably going to be much lower than that.  Even for those 5% of the cars that are still on the road, a good number of them may still be worth more than the voucher would pay for them.  So what’s the point in getting the voucher?   On top of that for many people just keeping their old clunkers makes more financial sense because it means they won’t have  payment on a new car, even if they are paying slightly more for gas.

With unemployment hovering around double digits, most people just can’t afford to be buying new cars right now. (In fact, many people are now saying that most of the “clunkers” that are still on the road, are actually owned by people in lower income brackets, and they really can’t afford a new car  anyway)

I’d much rather see the money spent on this program be used for things like paying down the national debt.    What do you think of the program?  Do you think it will be effective in it’s aims of taking less efficient cars off of the road?  Will it give a boost to new car sales? Is the program set to be a failure right out of the gate?

UPDATE: The program has been suspended after less than 1 week. Find the details here.

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Cash For Clunkers Rebate Program Might Save You Money On Your Next New Car Purchase. But Is It A Good Idea?

If you’ve been reading this blog for any period of time, you probably know that I’m not a huge fan of credit cards.  As a Dave Ramsey fan and facilitator for his Financial Peace University class, you’d probably understand why.  In general I think that using debt and credit are just poor ways to get ahead.

I’ve also talked about how Credit Card companies often do things that are unethical, and how they won’t look out for your best interests.  Sometimes they’ll even do things that are downright illegal!  Needless to say, in many respects the credit card industry is in need of some increased regulation.  It looks like that may be happening.

Credit Card Accountability, Responsibility and Disclosure Act (CARD) of 2009

On May 22nd, 2009 Barack Obama signed new legislation into law called the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act).  The bill looks to put some limits on what the credit card companies can do in regards to charging fees, upping interest rates,and in theory forces them to be more transparent with customers.  Many believe it will significantly change the face of the credit card industry.   Some of the major provisions include:

• Requires credit card companies to give cardholders 45 days advance notice of an increase in interest rates.
• Prohibits credit card companies from increasing interest rates retroactively on existing balances unless the cardholder is more than 60 days late in making a payment. If the cardholder pays on time for the following six months, the company will have to restore the original rate.
• Prohibits credit card companies from marketing and issuing cards to borrowers under the age of 21.
• Requires balances with higher interest rates to be paid first, instead of lower interest first as many companies do now.
• Permits consumers to set credit limits lower than the limit offered by the credit card company.
• Requires that statements be mailed out at least 21 days before payment is due.

Most of the provisions in the bill will not take effect for another 9 months (February 2010), others slightly longer.

The full language of the bill is available to view here: CARD Act

A Good Idea Or Not? Could There Be Unintended Consequences?

Not everyone is hot on the idea of this credit card legislation saying that it could hurt the industry, and have the unintended consequence of hurting those it is trying to help.  From the Washington Times:

“When you start restricting the price banks can charge to customers, they are going to start cutting back their lending,” said Erik Benrud, finance professor at Drexel University in Philadelphia.

“If the banks know they can’t raise rates on existing balances, that too will restrict their desire to make loans to certain groups,” he said.

In essence he’s saying that the people who might be helped by the provisions in the bill would actually be harmed because they wouldn’t be able to get credit in the first place, or as another person mentioned, the cost of higher risk borrowers would be transferred to responsible borrowers through higher interest rates and fees for everyone.  It could also mean fewer rewards programs.

Consumer advocates disagree that the bill will hurt as some industry experts have mentioned.

“You mean, if they can’t rip us off they are going to give us less credit?” said Gail Hillebrand, financial services campaign manager at Consumers Union. “We’ve been hearing that argument for a long time.

“I don’t think they’re going to give us less credit, but if they can’t rip us off, that’s a good thing,” she said.

Others went on to say that the argument that all borrowers will pay higher interest rates is a moot point – as many responsible borrowers are already seeing rate increases or added fees for no reason other than the companies are trying to make up for losses in other areas.

Personally I can see the law having some unintended consequences, and I fully expect that the credit card companies could in fact restrict access to credit, raise interest rates for all borrowers and cut rewards programs significantly.  We shall see if that actually  happens.

Conclusion

The credit card legislation really isn’t a big issue for me as i don’t use credit very often, and when I do it gets paid off right away (with cash I already have saved).  For borrowers that are responsible and pay off balances quickly, the provisions in this bill will probably have limited effect.

For those that carry a balance from month to month this bill will most likely give some added stability and transparency to their credit card relationships, and keep the companies from completely taking advantage of them.

Personally the only reservations I have about this legislation is that once again it means the government is getting way too involved in another industry, and they’re on their way to controlling pretty much every aspect of our financial lives.  I’d much prefer the free markets take their course, and that the government instead stress personal financial responsibility for average Americans, and help to make credit card use a thing of the past! (yeah right)

What do you think of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD)?  do you think it’s a good idea?  Do you think it will have unintended consequences? Let us know what you think in the comments!

What Others Are Saying

• Credit Card Reform Disputed
• Credit Card Legislation – Winners and Losers
• Credit Card Act Of 2009
• New Credit Card Legislation
• Problems With Credit Card Reform
• Credit Cardholders’ Bill of Rights Act of 2009
• What’s Your Take On The Credit Card Act?

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New Legislation Will Bring Changes To The Credit Card Industry

Times Are Tough, And So Is Finding A New Job

We’re living in a down economy and thousands of people have lost their jobs. Budgets are tight! A lot of people are struggling to make ends meet, and they’re having to find new ways to make money.

While listening to the radio this morning on my way to work I listened to a news piece about moms in one city who had lost jobs, or were having to find new sources of income to help the family stay afloat and avoid foreclosure.

One of them was entrepreneurial and had started her own business baking cookies.  She was selling them to family, friends and others via word of mouth. She wasn’t making a ton, but she was making enough to keep them from going under.

Then there were those on the other end of the spectrum, the women who were doing things that they normally probably wouldn’t have, but now were deciding that they had no alternative.  Several of the ladies had turned to jobs as strippers just to make ends meet. They justified it by saying that they had been forced to do this because their financial situation was tenuous at best, and without the income they would have lost their homes.  There just weren’t any other jobs available!

Listening to the piece really got me thinking. What would I do if times were tough?  What jobs would I do if we were coming up short and needed to make our mortgage payment?  What jobs would I not lower myself to do? Or is avoiding a financial catastrophe more important than my pride?

What Does The Bible Say?

On the one hand I’m reminded of the bible verse that tells us that we need to take care of our families.

If anyone does not provide for his relatives, and especially for his immediate family, he has denied the faith and is worse than an unbeliever.  1 Timothy 5:8

We need to take care of our families, and provide for them.   This means doing the hard work that it takes to make ends meet.  That may even mean taking some odd jobs that we normally wouldn’t in order to pay the bills.   Maybe it’s taking a paper route like my family did when I was younger.  It may be teaching english classes at a local community center, or being a janitor  on the weekends.  Whatever it is, there are always places that you can find some kind of work, even if it is just temporary.   Remember, if you work hard, God tells us that our needs will be met.

Those who work hard have all their needs met, but the lazy are always left craving for what they need.  Proverbs 13:4

Are there jobs that we shouldn’t do, or things we shouldn’t do for money, even if we’re in tough circumstances?  I think so, I think we need to hold ourselves to a high moral standard, and not do anything that would compromise our beliefs.   We need to stand strong in our faith, and God will be with us.

Blessed is the man who perseveres under trial, because when he has stood the test, he will receive the crown of life that God has promised to those who love him.  James 1:12

For me that would mean I wouldn’t take any job that I couldn’t do without having a clean conscience.  There are far too many jobs out there, even in these tough times, to be doing something I can’t feel good about.

How About You?

If you were strapped for cash, how far would you go to make ends meet?  What kinds of jobs would you take (or have you taken), and what kinds of jobs would you NOT do?  Do you think there is a line that shouldn’t be  crossed, or is providing for your family just too important?  Have you ever been tempted to do something that was against your conscience because you needed money?

Let us know your thoughts in the comments!

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If You Were Strapped For Cash, How Far Would You Go To Make Money?

I recently published a series of articles on the topic of emergency preparation and titled it, “In The Event Of An Emergency“.  The series is devoted to the topic of planning ahead for life’s little (and big) emergencies that we all know will come our way.

The series covered topics ranging from making sure you have insurance coverage and an emergency fund, to making sure your family is provided for in case the worst case scenario happens.

Today I thought I would do a quick recap of the posts and bring all the articles together in one spot.   So without further ado, here they are:

In The Event Of An Emergency

• What Should I Put In My Safe Deposit Box Or Fire Safe?
• What If I Die? Make Sure Your Family Has All Your Important Information In One Place.
• What Types Of Insurance Should I Have?
• An Emergency Fund Will Help Reduce Your Risk Of Financial Catastrophe.
• Setting Up A Good Financial Plan Can Help You To Weather Any Storm.

Conclusions

Something that I’ve taken away from writing this series is that we all go through hard times, things that were unexpected or unplanned for.  While we can’t keep ourselves from experiencing all of the pain associated with these events, we can plan ahead and minimize the impact.  A medical problem can go from being a bankruptable life event, to a bump in the road.    A fire in your home can go from being life changing to just putting your life on hold.

The point I’d like to get across in this series is that while we can’t always avoid life’s little emergencies, we can still plan ahead for them, and put ourselves in the best possible position to avoid having them become more than they need to be.

User Submissions

• How To Be Prepared For a Storm and/or Emergency @ goodfinancialcents.com
• In Case Of Emergency @ http://blessedbytwins.blogspot.com
• What To Include In Your Roadside Emergency Kit @ myliferoi.com

Have your own article on the topic of preparing for the unknown?  Let us know about it in the comments, or send us a link through our contact page and we’ll link to it here!

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In The Event Of An Emergency Series: Planning Ahead For Life’s Emergencies