Cash for Clunkers rules and tips

There's been a lot of confusion surrounding Cash for Clunkers. Here's a guide to help readers make the most of the government's program.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Peter Valdes-Dapena, CNNMoney.com senior writer

2002_ford_excursion.03.jpg
If you have a really big SUV, like a Ford Excursion, you could get a "Cash for Clunkers" rebate without having to meet any fuel economy requirements. The truck may still be worth more than the rebate, though,
Maximum cash for clunkers
Vehicles like these will help SUV and truck owners get the biggest bang for their trade-ins.

Find your next Car


NEW YORK (CNNMoney.com) -- The federal government's new Cash for Clunkers program has caused a lot of excitement for consumers. It's also caused plenty of confusion.

Buying a new car is a major financial commitment and you don't want to get so carried away playing the Clunkers game that you lose sight of other big financial benefits you could stand to gain, with or without the government's incentive.

Clunkers: Do I qualify?

Fuel economy: Your car must have an EPA-estimated combined fuel economy of 18 miles per gallon or less. The only number that counts is the one reported, as of July 24 on the EPA's fueleconomy.gov Web site. Your own personal experience with your car's fuel economy doesn't count.

Age: Your car must be under 25 years old, and they mean that literally. In other words, looking at the model year alone doesn't cut it. If you have a 1984 car, check the month it was manufactured. You can find it on a sticker inside your driver's side door. If your car was built in June or July, you'd better hurry. If it was built before June, you're out of luck.

Not on blocks: It would defeat the program's environmental purpose if all people did was drag out rusting "parts cars" to trade them in. Cars that aren't being driven don't pollute much.

So you have to prove that car has been continuously insured for the past year, which implies you've been driving it. Second, you have to show that it's been registered to you for at least a year. That shows it really was "your car" and not just something you picked up for a song just to cash in.

Cars vs. trucks

The rules differ depending on whether you're trading in a car or a truck. In either case, the vehicle you're buying cannot have a base price higher than $45,000.

Cars: If you're trading in a car -- as opposed to a truck or van -- and it meets all the qualifications, you're eligible to receive a credit.

If the car you're purchasing has EPA-rated fuel economy -- again, this is combined city and highway mileage -- of 10 mpg better than your trade-in, you're eligible for a $4,500 credit. If gets 4 to 9 mpg better, you're eligible for a $3,500 credit.

You could also trade in your car to get a new truck or SUV. In this case, with only a 2 mpg improvement, you would get the $3,500 rebate. With a 5 mpg improvement you'd get $4,500.

Trucks (Category 1): If you're trading in an SUV, van or pickup, things are even easier. The fuel economy requirements aren't as strict.

If you're trading in a basic truck, van or SUV -- in other words, not a heavy-duty truck or big passenger van -- you can get a $4,500 credit for purchasing a new truck or van with fuel economy that's better by 5 mpg or more. You can get a $3,500 credit for a 2 to 4 mpg improvement.

You can also trade your truck in for a new car, but if you do that you'll have to meet the stricter fuel economy requirements for cars.

Big trucks (Category 2): If you're trading in a bigger truck -- a truck with a wheelbase of 115 inches or a van with a wheelbase of 124 inches -- you're eligible for a $4,500 credit for buying a similar vehicle with a 2 mpg improvement or a $3,500 credit for buying one with a 1 mpg improvement.

Really big trucks (Category 3): If you're trading in a truck with Gross Vehicle Weight Rating (GVWR) of 8,500 to 10,000 pounds, all you have to do is buy a new one. Fuel economy doesn't even factor into it.

Vehicles like this don't get their fuel economy rated by the EPA, so a rebate based on fuel economy wouldn't work. Trucks like these are eligible if they were manufactured before 2001 and are less than 25 years old. They're eligible for a $3,500 credit if traded in for a new Category 2 or 3 -- meaning a big or really big -- truck, van or SUV.

GVWR is the combined total of the vehicle's weight and its maximum load capacity. Basically, it's how much the vehicle could conceivably weigh if you loaded it down with as much stuff as it's designed to carry. To find out your vehicle's GVWR, look for a sticker inside the driver's door frame.

Category 3 truck owners are only allowed to trade for another Category 2 or 3 trucks. Plus, there's only a limited amount of money available -- $ 7.5 million -- for Category 3 truck owners.

More than just Clunker money

If you take the government rebate, what you give up is the ordinary trade-in value for your car. You are entitled to the car's scrap value minus $50 the dealer is allowed to keep, but don't expect to get much from that.

Beyond that, you are still eligible for all the usual customer rebates that would apply whenever you're buying a car. Don't forget, you're also entitled to negotiate the price of the new car you're purchasing, as always. Also, the Cash for Clunkers program applies whether you're buying or leasing your new vehicle.

Before you take advantage of the program, be sure to check the value of your vehicle. It may be worth more than the rebate amount. Even if it's worth less, keep in mind that your actual benefit isn't $4,500 or $3,500, it's the difference between your car's real value -- what you would ordinarily get for your car -- and what the government will give you for it. That difference may not be worth factoring into your car-buying decision.

After considering quality, resale value and your own personal preferences, a car that doesn't get you the clunker cash may be the better deal. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Revolving door: Washington to Wall Street Former House Majority Leader Eric Cantor is headed to Wall Street. See who else has jumped the political ship for a lucrative career in finance. More
How to keep your naked photos out of hackers' hands Follow these steps to make sure that your nude photos and other sensitive information won't get hacked. More
9 reasons to be excited about Windows 9 Microsoft is expected to begin showing off Windows 9's features later this month. Here are the expected changes you should be thrilled about. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.