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Cash for Clunkers Credit Incentive Details
The “Cash for Clunkers” bill has passed both the House and the Senate and is expected to be signed by President Obama shortly. The bill is intended to boost U.S. auto sales while encouraging people to buy vehicles that have a mpg improvement over their existing ones.
If you have a vehicle that was made in 1984 or after and has an average fuel economy of 18 miles per gallon or less, than your vehicle may be eligible for an immediate tax credit at the time of your purchase. I immediately had the thought of buying a piece of shit car (thanks Adam Sandler) for a few hundred dollars and dragging it into the dealership. After looking into it though, you have to have had the car registered and insured for at least a year in your name. Bummer.
As I highlighted in the Chrysler Fire Sale post, now might be a good time to get a new vehicle due to dealer incentives, tax credits, high supply/low demand, and zero percent financing. If you have a P.O.S. car that you’ve been meaning to trade in, this “Cash for Clunkers” program might be one of those rare times where you could actually land a new vehicle at a price lower than a used vehicle that is a few years old and has wear and tear on it.
If you’re going to take advantage of this, you’ll want to move quick. From what I have read, the bill has set aside only $1 billion, and once it’s gone, you’re out of luck. However, the program hasn’t officially started, so stay tuned and be ready for when it does.
Cash for Clunkers Question and Answer
Q: How do I find out my Vehicle’s Average MPG? Is that the city or highway mileage?
A: Go to fueleconomy.gov, ‘find a car’, and look for the combined ‘Estimated New EPA MPG’. It’s the average overall mpg of the vehicle.
Q: Does this apply for used vehicles that I might want to buy?
A: Only new.
Q: Is there a price limit on the vehicle I’m buying?
A: Yes, the vehicle you buy must be $45,000 or less.
Q: What dates can I buy a qualifying vehicle and get the incentive?
A: At the latest update from July 1, 2009 to November 1, 2009, or the incentive money runs out, whatever comes first.
Q: Is their an income limit?
A: No.
Q: Is this retroactive?
A: No
Q: Is this totally separate from other deal incentives?
A: Yes. If you buy a vehicle, negotiate for the best price, and once you’ve negotiated, tell them you are trading in a clunker. I would not recommend mentioning this prior to your negotiated price, as the deal will probably use it as leverage against you (even though they have no validity in doing so as they don’t pay for the incentive).
Q: Is this U.S. made vehicles only?
A: No. Both foreign and domestic.
Q: What if I want to lease?
A: Your lease must be at least 5 years long.
Q: Is the credit mailed to me? How do I get it?
A: The dealer subtracts the credit from your final negotiated buy price and gets the funds sent to them directly from the government.
Q: Is the incentive taxable?
A: No.
Cash for Clunkers Discussion:
- Do you plan to cash in on “Cash for Clunkers”?
- What MPG vehicle would you be trading in and what do you plan on getting in return?
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My name is G.E. Miller and 
I want to trade in my Ford Expedition which has a kbb value of 7000. Would I get that value for the trade in and the incentive money or would I just get one or the other?
@ Kelli – Good question. No, you would want to sell that car on your own or go the traditional trade in route. The way the program works, the dealer is actually required to scrap the vehicle. Therefore, they don’t get to keep it and all that’s left is your credit. For any vehicle with a trade-in value of $4,500 and up, it makes sense to forego this program.
It will be very interesting to see how this plays out. Is taking on a car payment something people really need right now?
I’ve got a ’98 RAV4 AWD that is need of about $2K worth of work and has almost 120K miles. Would this auto qualify? Or do I go the trade-in route?
darn, my clunker gets 20/21 MPG…
I’m so, so tempted to do this but the thought of a new or used car payment creeps me out.
I really like this initiative. It’s good for the economy and the environment. I looked into this for my girlfriend’s car, but it turned out to be more worthwhile to just sell it privately. So the program does have its flaws, but I guess they have to limit abuse somehow.
I just bought my car this past weekend – too bad I didn’t have a clunking car to trade in for.
Oh well – I’m still stoked about my new car
So now the ‘Cash for Clunkers’ program has ended, it will be interesting to compare with Australia’s approach – specifically the tax rebate for new machinery (including cars)
@David, yeah, the tax incentive is ending for business at the end of this month, will be very interesting to do some analysis on the US scheme versus what our government offered.