On July 24th, the federal government finally released the guidelines for the “Cash for Clunkers” program. The much anticipated program can provide consumers with as much as a $4500 rebate when they trade in older vehicles for newer more fuel efficient models from participating dealers. Until now, dealers have been reluctant to sign up until the rules were announced. The National Automotive Dealer Association (NADA) reports such a rush for dealers to register that government servers were overwhelmed resulting in as much as a two-hour wait.
In addition, Edmunds.com reported that car shopping traffic to their site has reached record levels over the past couple of weeks. The law that introduced the “Cash for Clunkers” program has set aside $1-billion dollars for consumer rebates. It is estimated that this program alone will generate 250,000 new car sales between now and November 1. Registered dealers are also jumping on the bandwagon by offering additional rebate incentives. The 100-page document outlining the guidelines has been described as “fiendishly complicated” for both the consumer as well as the dealer. If you are considering shopping for a new car under the “Cash for Clunkers” program, get your questions answered here to avoid frustration associated with the tight restrictions of the program. Some used car dealers may buy your used car for cash and you could receive even more money that is allotted on the cash for clunkers program.
How do I know if my trade-in will qualify?
The guidelines state vehicles must be less than 25 years old which means a car must have been manufactured in 1984. The operative word here is “manufactured”. Check inside the door for the manufacturer’s sticker that provides the build date. Some 1984 models were actually built the previous year. Since the program was designed to get less fuel efficient vehicles off the road your trade-in must have a combined city-highway fuel economy rating of 18 miles per gallon or less. To determine this, go to fueleconomy.gov and remember it’s not what MPG your car currently gets rather what rating the government suggests.
Another qualifier is you must demonstrate that your car runs and can be driven under its own power. This would eliminate any old clunkers sitting around not registered. This rule was designed to deter individuals from buying wrecks from junkyards to be used as trade-ins. More of the fine print dictates that you must demonstrate the car has been continuously insured and registered to the same owner for at least a year before you attempt to trade it in.
Also keep in mind that it may not make sense to use the “Cash for Clunkers” credit if your trade-in is worth more. With the explicit guidelines for how dealers must administer this program, don’t be surprised if you find dealers convincing you that your trade does not qualify or even showing you a trade allowance for greater than the maximum voucher of $4500. This is the perfect opportunity to utilize the “bait and switch” dealership game so beware.
What will happen to my trade-in? Can it be resold?
The guidelines are clear in stating these cars can never be resold and must be disabled immediately. Dealers must take extreme measures to be compliant in order to receive their rebate. One technique is to drain the engine of essential fluids, add sand and run until the engines siege. Dealers must then contact a wrecking company to remove the unit from the premises. Once removed the wrecking company must crush or shred the car then provide a certificate of destruction to the participating dealer. All this must happen before the dealer is reimbursed.
A word to the wise: DO NOT trade your car under this program if you have NOT signed the contract and requisite paperwork. Many dealers will allow you to take the new car home while they “shop” your loan which means they do not have any loan approvals. It is possible your trade could be disabled even if the dealer can’t secure acceptable financing.
What new cars are eligible to purchase under this program?
Any domestic or import car is eligible under this program providing it meets the following fuel economy guidelines and is priced under $45,000. Cars must have a combined fuel economy rating of 22 MPG; SUVs, minivans, and small pickups must rate 18 MPG; and large van and truck must rate 15 MPG.
You are entitled to the $3500 rebate if the improvement if fuel economy rating is at least 4 MPG for cars, 2 MPG for SUVs and 1 MPG for large trucks. The $4500 rebate kicks in if the rating improves by 10 MPG, 5 MPG and 2 MPG respectively. How many “clunkers” can I trade-in?
Unfortunately there is a limit of one trade-in per owner with the credit applying to either a purchase or lease. Remember, the trade-in must show the registered owner which would eliminate using a car titled in a child’s name, for example. This may also present some problems with financing a unit with a spouse or significant other with credit challenges.
How long will the program last?
The program will only last until November 1st or until the $1-billion dollars runs out. If you are car shopping, beware. This is a rebate program that is designed to encourage you to expedite your car shopping and buying experience.