Common Questions About The Cash For Clunkers Program Answered: Gas Guzzler Rebate FAQ

A couple of weeks ago I wrote about the Cash For Clunkers program that was expected to be passed. Now, a couple of weeks later the program has passed and is signed into law, and people will soon be able to take advantage of it.

I’ve been getting emails and comments surrounding the program, asking for more details. I decided to put together a quick FAQ covering some of the most common questions surrounding the program.

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FAQ About Cash For Clunkers

Q: Is the billed signed into law yet?

A: Yes the Cash For Clunkers bill has been signed into law.  The program is now the responsibility of the NHTSA and they will be implementing the system with car dealers. The program’s official website is: http://cars.gov. Dealers will be responsible for signing up for the program, and participating dealers will eventually be listed on the government website.

Q: When will the program be available?

A: Your new car must be bought or leased between July 1st and November 1st to qualify.

cars-program-cash-for-clunk

Q: Can the car you purchase with the trade in voucher be a used vehicle?

A: The purchased vehicles must be new (2008, 2009, 2010 models) and cost no more than $45,000.   You cannot trade in a clunker for a motorcycle. If you’re looking for a used car, check out this site.

Q: Can I lease a car through the program,  or do I have to purchase the new car?

A: Yes you can lease, however, the Cash For Clunkers Act requires that any lease under the program be for a period of at least five years.

Q: How do I find the combined EPA mileage estimates on my old clunker to make sure it qualifies for the program?

A: Go to http://www.fueleconomy.gov and click on the model year of your vehicle, the make, and then the model. Under the words “ESTIMATED NEW EPA MPG” in the red banner, there is a red number with the word “COMBINED” under it. That is the new combined city/highway fuel economy for your vehicle. You may then enter the make, model, and model year of a new vehicle you may want to buy and see its combined MPG for comparison.

Q: Are there restrictions on the year of my trade-in?

A: The car can not be more than 25 years old, and it must meet the MPG requirements.

Q: Will all dealers be participating in the Car Allowance Rebate System (CARS)?

A: Most new cars dealers in the US will participate. They will have to register with the CARS program, but registration details have not been released yet by the NHTSA.  Registered dealers will be eventually listed on cars.gov, but it’s a good guess that most new car dealers will want to be a part of it.

Q: What do I need to bring when I decide I want to do the Cash For Clunkers trade?

A:  You should bring documentation showing the current owner of the vehicle, preferably the title, and documents showing that the vehicle has been “continuously insured by the same owner for a period of no less than 1 year prior to the trade-in.”   The final rule will specify what types of documentation would be acceptable  to prove ownership and the fact that the vehicle has been insured for the past year.

Q: Will I have to pay taxes on the voucher?

A: No.  The Cash For Clunkers Act expressly provides that the credit is not income for the consumer, so the consumer will not have to pay taxes on the credit.  The credit will be considered as income for the dealer.

Q: Are higher income folks excluded from the program?  Is there an income limit that leaves out some vehicle owners?

A: No.  Anyone can take part in Cash For Clunkers since it is designed to help new car dealers, and to help the environment.

Q: I bought a new car in February 2009.  Can the voucher apply to my past purchase – will it be retroactive?

A: No. Cars bought before the official start date (see above) won’t qualify for the credit retroactively.

Q: If my car is worth more than $4,500, should I take advantage of  the Cash for Clunkers credit?

A: The Cash For Clunkers Program would not give you any benefit if you are able to trade in or sell your car or truck for more than the $4,500 credit.   You’re probably better off not applying for the voucher.

Q: Is the CARS credit in addition to any  incentives that dealers are offering toward a new car purchase, or would this credit supplant those credits?

A: The CARS credit is separate from any manufacturer buyer incentives. For example, if your new car dealer is offering $3,000 off the list price of a car and you qualified for a $4,500 CARS credit from your trade-in, then the total reduction off the MSRP would be $7,500. You should always shop for the best deals before buying a car.

Q: Can I trade in more than one vehicle under the program?  Could I trade in two old cars and get a $9,000 credit?

A: The current wording of the bill indicates that only one CARS credit can be applied to a new car purchase.

Q: How do I know the amount of my credit?  Will I qualify for a $3,500 or a $4,500 CARS credit?

A:  The credit you get is determined by your current trade-in car’s current combined MPG, the new car’s combined MPG, and then the improvement you will get in MPG through getting the new car.  Here’s a graphic showing how to determine what your credit will be.

Q: Can I go to the junkyard and buy an old car and use it for a trade or trade in my parents old car?

A:  Probably not.   The NHTSA says you need to bring to the dealer documentation establishing the identity of the person who currently owns the vehicle (the title of the vehicle), and documentary proof that the vehicle “has been continuously insured consistent with the applicable State law and registered to the same owner for a period of not less than 1 year immediately prior to the trade-in.” There is some debate as to whether this means someone – like your parents could trade-in their continuously insured clunker for you, and then you can use the voucher. I wouldn’t count on it though.  Stay tuned for clarification on this question.

Q: What happens to my trade-in?

A: The car will be sent to the salvage yard. Some parts may be kept but the engine and drive-train will be crushed.

Conclusion

Those are a few of the more popular questions about the program that I’ve heard, and I hope that this helps to answer them.  If you have more questions about whether you are eligible or not, please check out our previous post on the Cash for Clunkers program.   Going through with it, and buying a new car?  Don’t forget to claim the new car sales tax deduction!  For more details check out my post looking at  common questions about the new car sales tax deduction.

Have other questions about the program that you’d like answered?  Need clarification on one of the points above?  Let us know in the comments and we’ll do our best to find an answer (or one of your fellow commenters can answer!).

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

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Last Edited: 11th February 2014

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Comments

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  1. Don Allen says

    Questions without answers on CARS Program:
    my car lease will end within 1 month. I plan to lease another one (with better milleage than the current). Am I qualified for CARS Program (technically, I don’t have any car to trade in for a new lease/purchase)?

    Thanks.
    Don

      • Julie says

        I,too, am turning in a leased vehicle. It’s a 2005 Murano. My dad seems to think that a leased vehicle should be counted as a clunker because the car is averaging around 15-16 mpg. I say it’s not eligible since Nissan still owns the vehicle once it’s turned in. Can you advise which is correct? Thanks!

        • says

          I believe you have to own the vehicle – and it would have to show up on the list of eligible vehicles – which it probably doesn’t if it’s estimated MPG is actually higher than what you’re getting.

  2. David says

    Any update about trading in parents/friends car? My friend is trying to sell his car for 1000, I want him to trade it in for me so I can get the credit for a new purchase. Is this possible (especially if I never take title of the car and pay him $1000 for other services rendered).

  3. EBG says

    Still wondering if the person who owns the “clunker” can buy a car for someone else in the family. My daughter’s car (the clunker) is in my husband’s name and she needs a new car. Any help is appreciated.

    • says

      From what I understand, it appears that the person who owns the clunker could buy the new car using the clunker and the received voucher, and then turn around and sell the new car to the friend or family member. If they wanted to charge $1000 more than they paid for the new car for their trouble, you could do that I think. As always, you’ll want to verify this before you go ahead and do it. :)

      • EBG says

        I actually called the Cash for Clunkers hotline and they told me my husband can turn the car in for my daughter to buy a car. I hope this works.

  4. mr. big says

    Car dealers are increasing prices for good MPG cars because of the increased demand (artificial) from the cash for clunkers program. Not being critical, but it is basic supply/demand economics.

    With the price increases, some markets will give consumers no net benefit. It is poorly written legislation. Especially since the turned in cars have a trade-in value of equal the scrap metal — because all cars under this program must be taken off the road. So some cars that qualify, may actually be worth more than the redeemable voucher.

    I don’t qualify for cash for clunkers because my car already gets good gas mileage.

  5. Mario says

    Hi, I had a question about the cash for clunkers program. The car is registered under my mother’s name but insured under my name. Can we purchase the car in both our names and still apply for the rebate? Thanks for your help

    • says

      Responses from some other users seem to indicate that you can do that. I would double check on cars.gov when the official guidelines come out.

    • says

      I don’t think so – as long as the vehicle gets less than 18 MPG and the newer one meets the requirements for the new vehicle.

  6. Samuel Bell says

    I have had a leased car for the past 2 years. The lease is due to expire soon. Does the program apply to leased cars that qualify as “clunkers”

  7. mark says

    the mpg calculator does not have my ’88 gmc with a 7.4 ltr, auto tranny, long bed in it. will I qualify for the program?

  8. Pam says

    I have a ’95 Honda Passport, 4 wheel drive. The 2 wheel drive ’95 Honda Passport qualifies, but not the 4 wheel drive….why?? i think it’s frustrating!
    Thanks,
    Pam

  9. Roni says

    Hi,

    I just helped my Mom buy a car July 8th, 2009, can I go back to the dealership and still get a rebate (I traded in a vehicle that is a clunker)? I had no idea that the program started and the dealer did not mention it.

    Thanks for any help
    Roni

      • bridgerbot says

        Hold on Peter, vehicles bought after July 1st, 2009 are eligible for the program. As long as Roni has a vehicle that meets the criteria, he should be eligible.

        • says

          You may be right about that – I’ve heard now that the program started July 1st – but i believe the dealer still has to have been a participating dealer/etc. I would call the number mentioned in a comment below to find out if there is anything you can do to get the credit (but if the trade wasn’t taken in as a CARS credit car – you still may be out of luck if it has sold from the dealer? Again, a question for the CARS hotline.)

  10. Jeremy says

    I work for a dealership and everything I am reading states that the dealers will have to report the credit (either the $3500 or $4500) as income. Does this mean that we will have to pay corporate income tax on this credit that is merely passed from the government to the consumer??? Thank you in advance.

    • says

      Yes, i believe the dealerships will have to pay taxes on it as income. The official site states:

      The CARS Act expressly provides that the credit is not income for the consumer. However, the credit will be considered as income for the dealer.

  11. Jeremy says

    If it is true that dealers will have to pay income tax on this credit, what about the deals that gross less than $1500? (Approx corporate tax on $4500) Would we have to turn these deals away, or maybe not participate in the program at all. What about special employee pricing for industry employees? Most of these deals will fall into this category.

  12. Robert Reznikoff says

    I personally own a car that qualifies as a trade-in for the cars program. I would like to lease a car in my corporation’s name. Is this possible, if so, how would I handle it?

    • says

      Under the program the lease must be for at least 5 years.

      the CARS Act requires that any lease under the program be for a period of at least five years.

      I can’t find any specifics about if you can lease a car in your corporation’s name. You can call the CARS Act hotline and they may be able to help you:

      866-CAR-7891 (866-227-7891)

  13. Kevin Graves says

    I bought my clunker that qualifies in jan. of 2008. but registered it in my moms name and my own name. We took her name off the title in jan. of 2009. The dmv says they only have the most recent registration on file what do i do?

  14. tj christopher says

    A dealer I went to said I needed to put a deposit on the car I want to buy until he figures out if I qualify for the cars for clunkers program — is this legal??

  15. Ken Maroney says

    Hi Peter,

    Actually the law states that the program covers cars purchased beginning July 1st. I purchased on the 17th and financed the full price and the dealer wrote up a provision where they will send me the rebate as soon as it comes to them.

    Thanks.

  16. John Beier says

    I’ve ordered a new vehicle that won’t be in for 30 to 60 days. I have a vehicle that qualifies for the CARS program. Can I fill out the paperwork for the CARS voucher now, or do I have to wait until the vehicle is delivered.

  17. jason says

    in january i was swithching insurance companies, i had more than one car insured. the one i was going to trade in showed that it expired on january 15(i think there was a 30 day grace period). it was reinsured with the new company on january 27. so it shows a lapse of 12 days. other than that it has been insured for the last 4 years. i went to trade it in, and they wouldnt do it because they didnt want to take the chance. is this correct, or is there some sort of exception?

    • Shan says

      Hi Jason,
      Even I have the same problem. I have a lapse of 8 days and I was rejected. I almost sealed a deal with my Honda Dealer and I was shocked with the rejection. Did you find any way out ?

  18. johnny shipp says

    Will Cash for clunker work on pre salvage titles auto? When checking the engine block numbers, they will not always be the same . As car people know, many time one car is made out of two or even three cars. Documentation – red tape FEDERAL GOVERMENT.

  19. jen says

    you should also put in there that if the vehicle you currently have is financed, it doesn’t count for the cash for clunkers program. Even if it meets the required mpg you still can’t get the voucher.

  20. Paul says

    I have a 1984 Cadillac that was manufactured before the date by a couple of months.
    Why is one two months newer eligable and mine is not when its the same exact vehicial?
    1984 Cadillac sedan Deville, 4. l and qualifys under the gas mpg.

    • says

      That is just the rule that the government decided on. The exact ruling from the cars.gov site. The car has to:

      have been manufactured less than 25 years before the date of the trade in

  21. Diane C says

    Hello,

    I have a car with a reconstructed title. A couple of dealers have told me that they are not willing to take this clunker because they can’t get an answer on whether they are allowed to accept it under the program. The car has a clear title. Can you help? Thanks.

    • Jacque says

      Did you find out any information on this? I have an R titled vehicle as well and am trying to get to the bottom of it?

  22. Dave Yanez says

    I have a 95 honda oddessy. It has 205,000 miles and uses oil. On cars.gov it says my vehicle does not qualify as it is rated at 20 mpg. Maybe 14 years ago it got 20 mpg, not now. That is a flaw in the progaram. They out to take the mileage into consideration.

  23. Dale H. says

    Can a person take a vehicle that does not qualify for the cash for clunkers in and make a deal for a trade – and then apply a cash for clunkers vehicle to get the voucher on top of that. I know you can not apply two clunkers-but this would be different.

    • says

      i think that might depend on the dealer. Often dealers will buy your trade even without you purchasing a car – mainly because they can buy it from you for less, then turn around and resell it for $1000-2000 more. Good luck!

  24. Mardell Barber says

    I purchased a new 2009 Lancer July 18, 2009. Not aware of this program. I would have loved to trade in my Jeep Grand cherakee 2000 toward the new car. Is it possible to still get the credit? It would help greatly.
    Thank you, Mardell Barber

  25. Bill Haworth says

    Who owns the clunker after it is traded in to the dealer? Is it the government, the dealer or someone else? Does the salvage yard that gets the clunker after trade in pay for it and if so to whom is the payment made?

    • says

      The dealer owns the clunker once it is traded in – I believe – and is then on the hook for the car if the cash for clunkers deal isn’t approved. That is unless the dealer puts a clause in the contract specifying that if the clunker cash doesn’t come through – the customer will have to make up the difference. Make sure to read your purchase contract to see if a clause like this is in there – otherwise if your voucher money doesn’t come through – you may be on the hook.

      I’m not sure if the salvage yards pay for the vehicle or not. Everything I read makes it sound like the dealers just drop off the vehicles at scrap yards to be recycled – at which time they get a certificate from the recycler so that they can collect the $3500-4500 dollars.

  26. Phani says

    HI,
    I had a question, my brother is owner of the old car and he paid insurance for the old car till last year end(December 2008), after that i used the car and i paid the insurance from January to till date.
    can you suggest me how can my brother can use of this program(cash fo clunkers) as insurance for the whole last yaer is not in his name.

    Thanks for your reply.

  27. Fred says

    I purchased a Honda Fit on July 30, traded in my ’94 Isuzu for the $4500 credit. The dealer said I qualified, checked all my paperwork, but I just a call today saying the deal has been rescinded due to a 4 day insurance lapse last year. Am I on the hook for the dealer’s lack of oversight? I already signed the contracts. Will I have to return the call? What are my options?

  28. Reno says

    This is a different question.

    I have a Lexus RX350 that I leased for 3 years, beginning September 2008. It has not been a year yet.

    I have decided that I want to buy the RX350.

    Would I be able to buy the RX350 right now, and use a Cash For Clunkers voucher [I have a 1991 Ford E-150 (clunker) sitting in my driveway]?

    I see no reason why not, but I’m not the expert!

  29. Ram says

    Hi,

    I have a clunker. I want to trade it in the CARS program. But want to know whether there is any restriction on how long I should hold the new car, before I can sell it? (Is there any time period that I have to wait like 1 or 2 years before I can sell the new car?)

    Thanks,
    Ram

  30. Kevin says

    My brother died 3 months ago. My mother has had his Ford Bronco in her name for 2 months. I heard that this car is good for $4,500 if we have the death certificate. Is that true? And is yes, how can I get it in writing for the dealer?

    Kevin

    • Kevin says

      The 1996 Ford Bronco has had no lapse with the insurance and license. The only thing is the title tranfer. One lady from Cars.gov told they had written an amendment for this sittuation. She was certain of it. I need to find it, if it does exist. Thank you for any assistance in this matter.

      Kevin

      • says

        Sorry I can’t find anything about this situation. If cars.gov is telling you that it qualifies, I would believe them, but make sure you don’t sign anything saying you’ll pay the dealer back if the deal doesn’t go through.

  31. Rob says

    Stumped the dealer with this one…

    I want to trade in my 1998 Ford Windstar 3.8 liter. It’s a Canadian model which has been titled, registered and insured in NJ since 2005. Called the cars.gov website, got transferred, with no answer. Dealer and I both believe that the car qualifies (it’s identical to US model other than km on speedometer vice mph). Going to try to call again on Monday. From the faq:

    “I don’t drive an American car but I would like to trade in my old car for a newer, more fuel efficient one. Is this program only for American cars?

    No. You may trade in or buy a domestic or a foreign vehicle.

    &

    How do I know if my car or truck is an eligible trade-in vehicle?

    There are several requirements (but you also have to meet certain conditions for the car or truck you wish to buy). Your dealer can help you determine whether you have an eligible trade in vehicle.

    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 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.

    Thanks for any advice…

  32. steve says

    I have a 17 year old, who has owned vehicle for over a year, and meets all the criteria for CARS. The dealers will not deal with her because she is a minor. Will adding my name to all documents, qualify. The new vehicle will then be registered in both of our names.
    Thanks….Steve

  33. joe says

    question

    I purchased a vehicle…got the clunker deal….bnut the vehicle has not yet been sdhipped from japan…does the dealer need a vin number ….even though the clunker work has been completed on the deal…? VIN number will be in within a week…by Aug27th

    Thanks

  34. jon says

    does anyone have an answer to the insurance lapse question, ive had insurance on my dakota for 5 years lapsed once in the past year, am i outta luck, im ready to buy an aveo but dont know if i can due to the stipulations on insurance are there acceptions? please respond soon seeing as though c 4 c ends monday thanks for the info

    • says

      From everything I’m reading an insurance lapse of even a few days will most likely disqualify you. I haven’t read of anyone successfully appealing a problem with lapsed insurance coverage, and I wouldn’t be too hopeful that you would have any luck with it either. Good luck!

  35. Henry says

    Please tell me this program will reappear.According to available information, I’d expected the program to last up to or near November.The news on Thursday evening(8/20) that the program was ending 8.00 EDST evening left no time to solidify my purchasing plans.Miffed? You bet I am.

    • says

      The program may come back, only time will tell. But as of a couple weeks ago the program ran out of money after less than a week of being available. After they passed another 2 billion for the program, they said it would be around again til november – or til money ran out. Money has now run out. sorry!

  36. Linda Nichels says

    I paid cash and took delivery of my new car a month ago and now it doesn’t qualify for the c4c–neither I or the dealer caught the mistake–it was titled in a trust—he wants me to pay up—am I the only on liable for the 3500??

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