|President Obama signed into law the Cash for Clunkers Law which is aimed at reducing fuel consumption by removing older, gas-guzzling vehicles from the nation’s roads. |
The cars and trucks turned in will be scrapped and their owners given a credit of either $3,500 or $4,500 toward a new vehicle. The amount of the credit depends on the fuel-efficiency rating of the new vehicle.
To qualify, consumers must turn in a vehicle that is no more than 25 years old and has a combined city and highway fuel economy rating of no more than 18 miles per gallon, as calculated by the Environmental Protection Agency.
Note: The EPA's combined mileage will be used. This is a combination of the highway and city mileage for vehicles based on converted mpg numbers which take into account the new EPA testing methods. This information can be found at FuelEconomy.gov by finding your current car's year, make, and model, and then clicking on the link titled "Compare to Official EPA Window Sticker Fuel Economy" and using the NEW MPG number.
The old vehicle must be drivable, and it must have been insured by and registered to the same person for at least the last year, preventing shoppers from buying an old car and flipping it to get a discount on a new vehicle. The credit cannot be applied toward a used vehicle or toward new vehicles that cost more than $45,000.
To get the full $4,500 credit, consumers must buy either a new truck or sport utility vehicle that is rated at least five miles per gallon higher than the scrapped vehicle or a passenger car that is rated at least 10 miles per gallon higher than the scrapped vehicle. Because the old vehicle will be destroyed, the credit is given instead of the regular trade-in value — not in addition to it — though some dealers might compensate customers for the vehicle’s scrap value.
While the program makes transactions on and after July 1 potentially eligible for credits, you may want to wait until all of the detailed issues that must be addressed in the implementing regulations are resolved and the final rule is issued. Issuance will occur around July 23. On the other hand the program only has $1 billion in financing, enough for about 250,000 consumers to use it, and ends Nov. 1, or sooner if the money runs out.
The official Web site for the program is cars.gov.