'Cash for Clunkers' 101: What You Need to Know

The House voted 316-109 on Friday to rush an additional $2 billion into the so-called "Cash for Clunkers" program that rids gas-guzzling vehicles from U.S. roadways to make room for more fuel efficient models. Car owners can receive up to $4,500 for trading in their old vehicles under the federal program that started Monday. Here are some pluses -- and pitfalls -- of the Car Allowance Rebate System (CARS):

No Top Models Allowed

As one of 86 models now eligible under the program under a reclassification of miles per gallon figures, a 1987 Porsche 911 could net you up to $4,500 under the program. But don't go heading to a Lexus dealership just yet to buy the 2009 LS shown here that starts at $63,825. The "new" vehicle, whether foreign or domestic, must not be a used car and must have a suggested retail price of not more than $45,000. The new ride must also meet minimum fuel economy levels, including at least 22 miles per gallon for passenger cars and at least 18 MPG for category 1 trucks. For a complete list of vehicles eligible for purchase under the CARS program, visit And one more bit of fine print: If you happened to purchase a new vehicle before July 1, just three weeks prior to the start of the program, you're not eligible for the government credit.

'Fast Start'

Don't get caught stuck in neutral. If you're considering selling that old hunk of junk in the driveway, get up and go. The CARS program will end on Nov. 1 -- or as soon as its $1 billion budget expires. As of Thursday, at least 22,782 vehicles have been traded-in and an estimated $858 million remains, according to The National Highway Traffic Safety Administration, meanwhile, estimates the program could take roughly 250,000 fuel inefficient vehicles off U.S. roadways. If that money does run out prior to the deadline, the National Automobile Dealers Association (NADA) says they'll seek even more federal funding. "There is no way to know how many vehicles have been sold through the clunkers program, but we do know that it's off to a fast start," NADA spokesman Charles Cyrill wrote "Consumer interest is running high. Showroom traffic is up. And early sales are exceeding expectations. How long the $1 billion for the program will last is anybody's guess, but this is a worthwhile program."

In this Associated Press photo, Jim Schierholz, 77, of Milwaukee, holds a sold sign at a Toyota dealership in Gladstone, Ore., where he turned in his Econoline van for a rebate toward the purchase of a Toyota RAV4.

Are You Eligible?

If getting up to $4,500 for your 1991 Toyota Camry (seen here) or 1987 BMW 5 Series under the so-called "Cash for Clunker" program sounds too good to be true, that's because it is.

Both cars are among 78 models no longer eligible in the Car Allowance Rebate System (CARS) program after an analysis by the Environment Protection Agency to comply with legislation that required miles per gallon ratings be accurate up to four decimal places.

"Of the 30,000 vehicle model types spanning 25 years, the result of converting to the more precise data needed for the CARS program meant that an additional 86 model types gained eligibility while 78 no longer qualify," the EPA said in a statement released Wednesday. That's a net gain of eight models, but here are some other cars not accepted under the EPA's "data refresh": 1997 Volkswagen Jetta GLX, 1995 Mazda MPV, 1994 Mitsubishi Diamante Wagon and the 1992 Saab 900.

All Cars Aren't Created Equal

While the goal of the CARS program is to get as many inefficient jalopies off the road, not every make or model gets the green light. In fact, there's quite a few qualifications for the program, including a 25-year limit on the age of the trade-in car and a minimum of 18 or less miles per gallon. That means a 1995 Toyota Camry, which gets an estimated 20 MPG, isn't eligible. Other eligibility requirements include that the car be in "drivable condition" and be continuously insured and registered to the same owner for the full year before the trade-in. Despite these requirements, the program will give the floundering industry a "shot in the arm," U.S. Transportation Secretary Ray LaHood said when kicking off the program on Monday. "With this program we are giving the auto industry a shot in the arm and struggling consumers can get rid of their gas-guzzlers and a buy a more reliable, fuel-efficient vehicle," LaHood said. "This is good news for our economy, the environment and consumers' pocketbooks."

The 1997 Toyota Supra seen here is ineligible under the "Cash for Clunkers" program. 

A Good Value?

The value of the credit consumers get from Uncle Sam under the CARS program is directly correlated to the difference of fuel economy between the two models, but be careful: Your "clunker" might be worth more than the maximum $4,500 credit. Check the value of your car at sites like or before heading out to your local dealership. According to the federal plan, if the new vehicle has a combined fuel economy at least 4 (but less than 10) miles per gallon higher than the traded-in vehicle, you'll be getting $3,500. If your new ride is at least 10 miles per gallon higher than your clunker, that'll equate to a $4,500 credit. Slightly different parameters apply to trucks. For more information, visit

In this Associated Press photo, a Chrysler Town and Country minivan that was turned in under the program is shown at a dealership in Palo Alto, Calif.

Well-Oiled Machine?

As federal officials and automobile industry leaders continue to tout the program, not all parties say the program is a well-oiled machine. Early on, some dealers were wary that they'll actually be reimbursed by Uncle Sam for money they've paid to customers, while others say computer problems have stalled their participation. John Mocadlo, general manager at Barberino Nissan in Wallingford, Texas, said he's sold 24 vehicles in exchange for "clunkers" he's still waiting to unload. "The government had a Web site that basically was going to give us redemption codes for all the vehicles," Mocadlo told "You get a call ever half hour, 'Is my car ready? Is the clunker program ready?' And the people think you're lying to them, but it's the government dragging their feet. They are just not giving us the tools that we need to deliver the vehicle."

Rick Mahoney, of Billerica, Mass., center, passes a pen to his daughter Ally, left, as they complete a purchase under the program on July 28. 


Keep on Truckin'?

Not all vehicles under the CARS program are created equal. If you own a category 3 truck, defined as a work truck or large cargo van between 8,500 and 10,000 pounds, the truck must not be later than model year 2001 and not earlier than 25 years before the date of the trade in. These rules exist, in part, because work trucks are not rated for fuel economy by the Environmental Protection Agency. Work trucks and large cargo vans may also only be traded in for the purchase of a category 2 truck (large van or pickup truck) or another category 3 truck. And just 7.5 percent of the $1 billion appropriated for the program may be allotted for credits for work trucks. Once reached, the National Highway Traffic Safety Administration will cease making payments for these trade-ins. Dealerships like the one seen here in Oregon City, Ore., reporting increased traffic since the program began.


Some Auto Recyclers Aren't Sold

The new federal program isn't a gas for everyone involved, particularly auto recyclers who sell used engines and drivetrains from scrapped vehicles. Under the federal CARS program, dealers are required to destroy the used engines by replacing their oil with a water-sodium silicate mixture so they won't be "flipped," or resold to a third party. Some aren't sold on the idea, however. Michael Wilson, executive vice president of the Automotive Recyclers Association, told the Associated Press:  "Why throw away good parts when the supply chain is in jeopardy? It doesn't make a whole lot of sense." Engines and drivetrains are roughly 60 percent of recyclers' revenue from a used car, Wilson told AP. The policy, according to the Automotive Recyclers Association, could destroy parts that would be otherwise sellable, like pistons.

Norman Wright, owner of Stadium Auto Parts, talks about a 2006 Chrysler PT Cruiser from which some parts have been pulled from in this Associated Press photo taken on July 23.


Finance Problems

A credit of up to $4,500 for that 1987 Buick Regal or 1988 Mercury Cougar is a great start toward a down payment on a new car, but car buyers must realize that the same rules of auto financing still apply under the "Cash for Clunkers" program. "Those consumers who plan to use the CARS program will get the most out of their vehicle financing experience if they do their homework," Eric Hoffman, a spokesman for Americans Well-Informed on Auto Retailing Economies, said last week. Prior to visiting the dealership, Hoffman suggested consumers set a budget, compare annual percentage rates and other financing terms from several lending sources and become familiar with terms you'll hear during negotiations (like fixed- and variable-rate financing). For more, visit

Paperwork for vehicles already submitted under the program, seen here, is shown in a box at a Toyota dealership in Palo Alto, Calif., on July 28.

Wheelin' and Dealin'

While announcing the kickoff of the CARS program on Monday, Transportation Secretary Ray LaHood said 17,000 dealers nationwide had submitted applications to participate in the rebate program. That figure is now up to 19,328, with a total of 23,005 applications received. One of the biggest concerns for the dealers, however, was whether or not they could be taxed for the consumer stipends. Some dealers expressed concern that's exactly what would happen -- that they’d be taxed on those funds -- but that won't happen, according to National Automobile Dealers Association officials. "There's no net taxable income for the dealers," NADA spokesman Bailey Wood told Automobile Magazine after consultations with the National Highway Traffic Safety Administration and the Internal Revenue Service. "It's amazing how quickly NHTSA has been handling this."


In this July 28 Associated Press photo, a car submitted as a clunker sits atop a Dumpster at Capitol City Pontiac GMC in Berlin, Vt.

'Cash for Clunkers' 101: What You Need to Know

The House voted 316-109 on Friday to rush an additional $2 billion into the so-called "Cash for Clunkers" program that rids gas-guzzling vehicles from U.S. roadways to make room for more fuel efficient models. Car owners can receive up to $4,500 for trading in their old vehicles under the federal program that started Monday. Here are some pluses -- and pitfalls -- of the Car Allowance Rebate System (CARS):

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