President Obama today signed the “cash for clunkers” law, now known as “Car Allowance Rebate System,” that has been touted as a key stimulator for the auto industry and an environmental aid. The law provides $1 billion in funding, with $50 million allocated for administration. The specific guidelines for the program will be revealed in the next 30 days, when the plan takes effect on August 1.
The CARS program is intended to encourage consumers who own an older, gas guzzler to purchase or lease a new, more fuel-efficient vehicle. In doing so, it is expected to give the auto industry a sales boost, while at the same time transitioning participating car owners to thriftier vehicles and thereby reducing national fuel consumption.
The National Highway Traffic Safety Administration (NHTSA) working with manufacturers, dealers, and recycling centers to develop the program specifics. Dealers will need to register to participate.
Car Allowance Rebate System basics
While the details are being finalized, the government has released some elements from the program, which have changed little since our previous reports.
To qualify, the trade-in vehicle must:
- have been manufactured less than 25 years before the date you trade it in
- have a “new” combined city/highway fuel economy of 18 miles per gallon or less
- be in drivable condition
- be continuously insured and registered to the same owner for the full year preceding the trade-in
To check the combined city and highway fuel economy, consumers are directed to fueleconomy.gov.
Leases on new vehicles are eligible, so long as the lease is for at least five years—a very long time for a lease. The manufacturer's suggested retail price cannot exceed $45,000. Used cars are not part of the program.
Purchased vehicles may be from domestic or foreign brands, through participating dealers.
The chart below spells out the scenarios, matching the trade-in and purchase to the credit. These funds would be applicable at time of purchase.
Car Allowance Rebate System
| ||Passenger car light-duty || |
Large light-duty truck
(6,000 – 8,500 pounds)
|Minimum fuel economy for a new vehicle (EPA combined) || 22 mpg || 18 mpg || 15 mpg |
|$3,500 credit ||Mileage improvement of at least 4 mpg ||Mileage improvement of at least 2 mpg || |
Mileage improvement of at least 1 mpg or trade-in of a work truck.*
|$4,500 credit ||Mileage improvement of at least 10 mpg ||Mileage improvement of at least 5 mpg ||Mileage improvement of at least 2 mpg |
*Trade-in must be at least pre-2001.
The government has launched a Web site to answer common questions at www.cars.gov. For more information on the Cash for clunkers program, see our guide.
Cash for clunkers: Recommended cars that qualify for a voucher
Cash for clunkers: The best gas guzzlers to junk
Cash for clunkers bill cuts fuel consumption–running the numbers
—Eric Evarts and Jeff Bartlett