2009 Cash For Clunkers Program – Trade In Your Old Junker For Money

by Mike Holman

President Obama has recently signed the “Cash For Clunkers” program – officially known as the Car Allowance Rebate System (CARS).  This federal program is being run by the National Highway Traffic Safety Administration and has a budget of $1,000,000,000 (1 billion dollars).  The basic idea of the program is that you can trade in your old gas guzzler pimp-mobile for a new car which has better mileage.  The government will pay you either $3500 or $4500 for your trade in which is likely a lot more than the car is worth so there is profit to be made.  This is yet another dimension of the 2009 stimulus package which has seen quite a few different efforts already.

[edit Aug 30 – Cash for Appliances program announced – Get rebates for new fridge or other appliances.

[edit July 31 - the Cash for Clunkers program has ended]

[edit July 31 - the Cash for Clunkers program has been continued]

Is the Cash for Clunkers payment considered taxable income?

[edit Sept 27 - Cash for Appliances - List of Eligible Appliances]

[edit Dec 9 – Cash for Caulkers

There are several motivations for this program:

  • Environmental – Getting people out of fuel-hogging gas guzzlers and into smaller, newer more efficient gas-sippers is better for the environment.
  • Help the car industry – Car sales are down dramatically this year so any sort of boost which motivates people to buy new cars will help the car companies.
  • Stimulus money – Adding more stimulus money into the economy should help (in theory) revive the economy and reduce unemployment.

Rules of the 2009 Cash For Clunkers program

  • Car must be less than 25 years old (built in 1984 or later).  This applies to the date of trade-in relative to the manufactured date of the car.  See section below for more info.
  • Can only be used for trade-in on a new 2008,2009 or 2010 car.  Outright purchase or lease.  Used car purchases are not eligible.
  • Trade-in car must get 18 mpg or less (city/highway combined).  See this website to find out the mileage for your car or this site to find your car.
  • Programs ends on November 1, 2009 or when the program funding (1 billion dollars) is depleted.  Trade-in must occur on July 1, 2009 or later.
  • The new car must have a purchase price of $45,000 or less.
  • Credit will be either $3500 or $4500.  If the new car gas mileage is between 4 and 10 mpg more than the old car then the credit is $3500.  If the difference is at least 10 mpg then the credit is $4500.
  • Applies to new cars of any country – domestic and foreign cars are all eligible.
  • The new car must have a combined fuel economy of at least 22 mpg.  See this website to find out the mileage for your car or this site to find your car.
  • The credit will be applied to the purchase of the new car.
  • The car buyer doesn’t have to file anything – the car dealer will handle the documentation.
  • The credit will not be considered as income for the car purchaser.
  • All the normal credits and rebates for the new car will still apply in addition to the ‘cash for clunker’ credit.
  • The trade-in car must have been owned by you and insured for the past year (ie 365 days).  You must provide documentation for this.
  • Car must be driveable!!

Click here for more information on the Cash for Clunkers program.

How do I know exactly how old my car is?

To be eligible for this program there has to be less than 25 years from the date of car manufacture and the trade-in date.  To find out the manufacture date of your car – check the following:

The month and year of manufacture (e.g., 1-96 (January 1996)) appear on the safety standard certification label that is located on the frame or edge of the driver’s door in most vehicles.

  • If the car was built in 1985 or later then it is less than 25 years old.
  • If the car was built in 1984 and the car manufacture month and day is greater than the trade-in date then it is less than 25 years old.
  • If the car was built in 1984 and the car manufacture month and day is less than the trade-in date then it is greater than 25 years old and not eligible.

For example if you do the trade-in on Aug 1, 2009 and the car was built on Sept 18, 1984 then it is less than 25 years old.

If you do the trade-in on Aug 1 and the car was built on April 1, 1984 then it is older than 25 years and is not eligible.

Please note that having a car less than 25 years old does not mean you automatically qualify for the rebate.

Is it worth doing?

This program is worth taking advantage of only if both of the following scenarios apply:

  1. Your old car is worth less than the rebate.  This might seem obvious but if your old car is worth $8,000 then you don’t want to use this program to get a $3500 or $4500 rebate.
  2. You were planning to buy a new car anyway.  New cars are expensive so if you are using this program to help you justify a new car purchase using credit then it’s probably not a good idea.  Some people are better off just selling the old car and buying a used car if they can’t afford a new one.

Downsides of this program

This program seems very slanted towards benefitting the car industry.  Undoubtedly there are a few consumers who might benefit from this (if they were going to buy a new car soon) but there will also be others who buy a new car because of this program when they should really just buy  a used car or even just hang on to the old junker for a while longer.

Some issues:

  • More consumer debt – Some consumers will be tempted to take on more debt because of this program which might hurt them.
  • Environmental impact – The environmental impact of making the new car might outweight the gas mileage reduction.  In some cases the difference in gas mileage won’t be enough to offset this.
  • Lack of eligibility – It’s hard to imagine that there are very many people who can afford a new car but are driving an old junker around.  A lot of people who buy new cars sell them before they get to the $3500 value level.
  • Dealer scams – Consumers might be “rushed” by dealers to pay a higher price for the new car since the program only has a certain level of funding.

More information

Does my car qualify for the “cash for clunkers” program?

Clunkers for Cash – Is it even worth it?

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{ 3 comments… read them below or add one }

1 anne price

I unfortunately missed renewing my registration by on month. I’ll register it tomorrow. Does this mean I cannot be part of this program?

2 Four Pillars

Anne – the rule says it has to be registered so you might be out of luck. You should talk to a dealer or check out the gov’t websites – they might make an exception

3 Alice Wong

I understand your explanation on the car being less than 25 years….unfortunately some other website was not as clear….I input my info 0n my 1984 RX7 and they congratulated me on that my car qualify…..the car dealer must not have known or they were trying to scam me…I spent over5 hours there….wrote the check out, listening about the warranty program…they shook my hand and congratulated me on my new car purchase..While I was getting my stuff from my old car and transferring into my assume “new” car the dealer call me back to the office ..telling me that my car was 4 months too old …they gave me the speech about they still want me to have the new car but of course I would have to come up with $2000 dollars more plus my car!…didn’t take the deal…don’t know if they made an honest mistake or not….but I would like to know is why the cash for clunkers program made it so stingent to the month ….to me 1984 is 25 year old car weather if it manufactured in January or April or August …If you can give me the answer to this question maybe I could put this bad situation that happen to me to rest…thank you ….Alice Wong

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