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.
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.
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.
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.