By now, everyone has probably already heard about the Cash for Clunkers program, officially known as CARS, standing for “Cars Allowance Rebate System”.   In case you haven’t heard, the U.S. government created a $1 Billion incentive program in July 2009 to get consumers to trade in their fuel sipping clunkers for new cars with better gas mileage.   In its debut this past week, there was overwhelming demand and the $1 Billion is supposedly already used up.  The government is now working to extend the program by injecting about $2 billion more into it.   However while that’s being worked on, the program is STILL IN EFFECT.

So, if you’re interested in the cash for clunkers program, here’s how the program works along with answers to some common questions.

What are the clunker cars that qualify for the trade-in?

  • your clunker car must have a combined highway and city fuel economy of 18 miles per gallon or less. there are about 30,000 car models that qualify; you can check if your car qualifies on the government website, http://www.fueleconomy.gov/feg/sbs.htm
  • your car must have been manufactured less than 25 years before the date of the trade-in.  the date of manufacture is typically printed on the frame or edge of the driver’s door on the safety standard certification label
  • your car must be in drivable condition
  • your car must have been registered and insured by the same owner for at least a year before the trade-in
  • Keep in mind work trucks (i.e., very large pickup trucks and cargo vans) have different requirement

What are the new vehicles that are qualified for purchase or lease?

  • the cash for clunkers program applies to the purchase or lease of new vehicles only; used vehicles do not qualify
  • the new vehicle must have a manufacturer’s suggested retail price of not more than $45,000
  • the new vehicle must meet minimum fuel economy levels depending on the type of car
  • for passenger cars, the new vehicle must have a combined fuel economy value of at least 22 miles per gallon
  • For Sport utility vehicles (SUVs), small and medium pickup trucks, minivans, and small and medium passenger and cargo vans with a Gross Vehicle Weight Rating or GVWR less than or equal to 8,500 lbs or defined by the government as a category 1 truck (see http://www.fueleconomy.gov/feg/carsglossary.htm for more info on the definition) for more info on the definition), the new vehicle must have a combined fuel economy value of at least 18 miles per gallon
  • For Large pickup trucks and vans with a GVWR less than or equal to 8,500 lbs. Large pickup trucks are defined as having a wheelbase greater than 115 inches, and large vans are defined as having a wheelbase greater than 124 inches.  For this class of vehicles defined as category 2 trucks (see http://www.fueleconomy.gov/feg/carsglossary.htm for more info on the definition), the new vehicle must have a combined fuel economy value of at least 15 miles per gallon
  • For work trucks such as Trucks, vans, and SUVs with a GVWR greater than 8,500 lbs. and less than 10,000 lbs, defined as category 3 trucks (see http://www.fueleconomy.gov/feg/carsglossary.htm for more info on the definition) in which  there are no EPA fuel economy ratings, there are no minimum fuel economy requirement; however, there are special requirements around the age of the vehicle that apply (see below for more details)

You can find out the combined fuel economy of a new vehicle by either (1)  locating it on the new car’s window sticker (known as the “Monroney label”) or (2) by visiting http://www.fueleconomy.gov/cars or sites like Edmunds and looking up the make, model, year, etc.

How is the amount of cash rebate determined?

  • the cash rebate will either be $3,500 or $4,500 depending on the type of vehicle (passenger car or category 1, 2 or 3 trucks/SUV’s/vans) and the difference between the combined highway and city fuel economy of your clunker car vs the new car  you’re looking to buy or lease

For passenger cars:

  • the rebate is $3,500 if the combined fuel economy of the new car is equal to or greater than 4 but less than 10 miles per gallon than your old car
  • the credit is $4,500 if the combined fuel economy of the new car is equal to or greater than 10 miles per gallon than your old car

For Sport utility vehicles (SUVs), small and medium pickup trucks, minivans, and small and medium passenger and cargo vans with a Gross Vehicle Weight Rating or GVWR less than or equal to 8,500 lbs or defined by the government as a category 1 truck  (for more info on the definition, see http://www.fueleconomy.gov/feg/carsglossary.htm)

  • the rebate is $3,500 if the combined fuel economy of the new category 1 truck is equal to or greater than 2 but less than 5 miles per gallon than your old car
  • the credit is $4,500 if the combined fuel economy of the new car is equal to or greater than 5 miles per gallon than your old car

For Large pickup trucks and vans with a GVWR less than or equal to 8,500 lbs. Large pickup trucks are defined as having a wheelbase greater than 115 inches, and large vans are defined as having a wheelbase greater than 124 inches, defined as a category 2 truck (for more info on the definition, see http://www.fueleconomy.gov/feg/carsglossary.htm)

  • the rebate is $3,500 if the combined fuel economy of the new category 2 truck is equal to or greater than 1 but less than 2 miles per gallon than your category 2 vehicle trade-in
  • the credit is $4,500 if the combined fuel economy of the new car is equal to or greater than 2 miles per gallon than your old car
  • A $3,500 credit applies to the purchase or lease of a category 2 truck if the trade-in vehicle is a category 3 (work) truck that was manufactured not later than model year 2001, but not earlier than 25 years before the date of the trade in

For work trucks such as Trucks, vans, and SUVs with a GVWR greater than 8,500 lbs. and less than 10,000 lbs.  These vehicles do not have EPA fuel economy ratings.  (for more info on the definition, see http://www.fueleconomy.gov/feg/carsglossary.htm)

  • since these vehicles don’t have fuel economy ratings, the requirements are that they were manufactured not later than model year 2001 and not earlier than 25 years before the date of the trade in
  • work trucks may only be traded in for the purchase of a category 2 truck or another category 3 truck that is of similar size or smaller than the traded-in vehicle. Finally, the Act provides only for a $3,500 credit for trading in a work truck.

What if I had recently bought a new car and traded in my clunker car?  Can I still get the rebate?

  • If the purchase was before July 1, 2009, you are not eligible for the credit.
  • If the purchase was on or after July 1, you may be eligible for the rebate if your used and new vehicles meet the program requirements.  Contact your dealer to ask.

Keep in mind the program makes sense only if the vehicle you’re trading in is worth less than $4,500 which is the maximum rebate the government provides.  So first check the value of your used car on sites like Kelly Blue Book at www.kbb.com or Nada Guides at www.nadaguides.com.

Also, an important thing to keep in mind is that the rebate from the program is provided by the government.  Make sure to research if there are additional rebates and discounts outside of this program offered by the dealer or manufacturer.  Check out Edmunds to see if there are rebates/incentives for the new vehicle you want: http://www.edmunds.com/incentives/RebateController?step=0&tid=edmunds.n.incentivesindex.incentives.1.1.*

There are a lot more information about the CARS or cash for clunkers program and how it works on the CARS.gov website.

Search used cars for sale and find the best deals near you at iSeeCars.com.
To get a FREE iSeeCars VIN Report for a car, click here.