Financial Fellow

Written by J.P. Wicklein

     In May I wrote about the federal “Cash for Clunkers” program.  Through the program, owners of poorer mileage cars could be eligible to receive up to $4,500 toward the purchase of a new, higher mileage car.  Last month, the “Cash for Clunkers” program was passed by Congress and signed into law by President Obama.  It has been officially re-branded the “Car Allowance Rebate System” (CARS).  Here are the details:

How to qualify for CARS

·         Your car or truck must be less than 25 years old at the time of trade-in.

·         You must purchase, or lease, a new car.

·         Your trade-in must get 18 miles per gallon or less.  (Larger trucks, SUV’s, and cargo vans have different mpg requirements.)  The miles per gallon rating is based on the “Estimated New EPA MPG” found on www.fueleconomy.gov. 

·         Your trade-in must be registered and insured continuously for one full year preceding the trade-in.  (This prevents someone from buying a cheap used car just for the trade-in value.)

·         The program only lasts four months (July 1, 2009 – November 1, 2009) or, until the allocated funds run out. 

·         The new car you purchase, or lease, cannot have a manufacturer’s suggested retail price greater than $45,000.

·         The new car you purchase, or lease, must have a combined fuel economy rating of at least 22 miles per gallon.  (Different standards apply for trucks, SUV’s, and vans.)

How much is the credit?

     The value of the credit depends on the difference in mileage between your trade-in and the new car.  To qualify for a $3,500 credit the new car you purchase, or lease, must have a combined fuel economy rating between 4 and 10 mpg higher than your trade-in.  If the difference is 10 mpg, or more, you will qualify for the full $4,500 credit.  (Different guidelines apply for trucks, SUV’s, and vans.)    

More useful information

·         The dealer you purchase, or lease, your new car from will apply the credit at the time of purchase.

·         Under the program the vehicle you trade-in must be destroyed.  So, you should be able to negotiate an additional discount for your trade-in beyond the CARS credit, however, it probably won’t exceed the scrap value of your car.  (The dealer is legally required to disclose the scrap value of your trade-in.)

·         Both domestic and foreign vehicles qualify for the program.

·         The CARS credit you receive will not be subject to taxation.  (Dealers, however, are required to report it as income.)

·         You can combine the CARS credit with any other discounts or rebates.  Further, you can also combine the CARS credit with other Federal and State incentives, such as the hybrid vehicle tax credit.

For additional information

     The final nuances of implementing the CARS program are still being worked out by the NHTSA and will be issued on, or around, July 23, 2009.  All details will be made available on the official government website:  www.cars.gov.  Alternatively, you can call the CARS hotline at (866) CAR-7891 for more information.

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Photo by:  circax