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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