Cash for Clunkers ends Friday

You've probably seen the commercials advertising the U.S. Government "Cash for Clunkers" program. Consumers who trade in cars and trucks with crappy fuel economy will receive a $3,500 or $4,500 credit towards the purchase or lease of a new, fuel efficient car.

On Tuesday I spoke to a few car sales managers in the Folsom Lake area and got their input on how the program is working out so far.


"Good" was the term I heard most frequently. The sales manager at Folsom Lake Toyota didn't want to say more than that, but his salesmen were obviously happy with the program.

"Its not just the Prius!" was what one salesman found himself explaining over and over again. Any car with a 22 mpg or better rating qualifies, which for Toyota includes their 2.4 and 3.4 liter engines. As of noon on Tuesday, they had taken in 81 clunkers, almost all of them valued at $4,500.

It was at Folsom Lake Toyota that the real expediency of the situation was explained to me.

"When Canada had a similar program, they gave out $2 billion worth of vouchers in nine days!"

$1 billion has been authorized for the US program from July through November 2009, enough for about 250,000 clunkers. Every dealer I spoke to expressed concern that the money would run out and they would be left holding clunkers with no value. Some had calculated that each state would be able to reclaim 5,000 old cars.

Everyone was eager to find some tally of the total clunker count so far, but the National Highway Transportation Safety Administration (NHTSA) hasn't published that number.

The Basics: Old cars traded in are good for either a $3,500 or $4,500 credit. The actual value of the car isn't important, if the car is worth more than $4,500 in trade, it shouldn't be used for the cash for clunkers program.

The old car must have combined (highway and city) fuel economy of 18 miles per gallon or worse.
It doesn't matter what the actual fuel economy of your particular car is, what is important is the MPG rating that your car achieved when it was sold new. That information is available on the Official Tables of Gas Mileage:

For example, these don't qualify:
2003 Saturn Vue (21 mpg)
1999 Hyundai Elantra (22 mpg)
1998 Acura Integra (24 mpg)
1986 Volkswagen Jetta (22 mpg)

These qualify:
1998 Lincoln Town car (18 mpg)
1998 Lincoln Navigator (12 mpg)
1990 Hyundai Sonata (18 mpg)
2003 Mercedes SL500 (16 mpg)
2003 Honda Pilot (17 mpg)
2003 Pontiac Aztek (18 mpg)

New car must have a combined fuel economy of 22 mpg or better. If the new vehicle is an SUV, the fuel economy can be a little worse, at least 18 mpg.

If the new vehicle has a fuel economy which is 10 miles per gallon better than the old, the voucher will be for $4,500. The miles per gallon figures are usually listed on the new car window's sticker.

Here are the trade-in values:

Car traded in for a car: 4 mpg improvement gets $3,500 - 10 mpg gets $4,500
Car traded in for an SUV: 2 mpg improvement gets $3,500 - 5 mpg gets $4,500
SUV traded in for a car: 4 mpg improvement gets $3,500 - 10 mpg gets $4,500
SUV traded in for an SUV: 2 mpg improvement gets $3,500 - 5 mpg gets $4,500.

(Also category 2 and category 3 trucks can qualify for $3,500 if they are replacing a truck which is 8-25 years old or $4,500 if they aren't work trucks and they are rated at 2 more miles per gallon.)

More Information:
The CARS Act specifies that not more than one credit may be issued to a single person, not more than one credit may be issued for joint registered owners of a single eligible trade-in vehicle, and that only one credit under this program may be applied toward the purchase or lease of any single new vehicle.

  • Only good on new cars costing less than $45,000. Sorry Diddy.
  • Consumers can combine this with other State and Federal incentives, such as the hybrid vehicle credit.
  • The engine and drive train of the used car must be destroyed and cannot be reused in another car. The glass and other parts can be re-used.
  • Can be applied to new car purchases and leases of at least five years.
  • Only the purchase or lease of new vehicles qualify
  • Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
  • Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in, so you won't be able to buy a clunker off of ebay.
  • You don't need a voucher, dealers will apply a credit at purchase and will take responsibility for verifying your clunker.
  • Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
  • The program requires the scrapping of your eligible trade-in vehicle, and that the dealer discloses to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

I didn't get a chance to talk to the manager at Folsom Lake Honda, but one of their salesmen expressed disappointment at being unable to help a gal with a giant dually truck manufactured in 1984,
"Her manufactured date was twenty five years, five months ago, she just missed the cut-off!"

I got the most help from Mike Rutherford, sales manager at Nissan of Folsom Lake. He let me know that foot traffic had doubled overnight. Nissan Altimas, Versas and Cubes were the most popular new cars selected. The clunker traders so far had been a diverse group, not neccessarily poor, with better-than-average credit. Some had even paid for their new cars in cash.

I asked him about the clunkers and he pointed me to a row of sorry-looking trade-ins and the end of the lot. "Some are junk, but we got one BMW, an Isuzu Trooper and a Land Rover. A Cadillac limped in over the weekend. We had to wrestle the key out of the ignition, but it ran, so it qualified."

Mike showed me how the credit could be applied along with other discounts on a $19,760 Nissan Sentra: "with $2,000 in dealer incentives and a $4,500 Cash for Clunkers voucher, if we drop $1,000 from the sticker, a buyer could drive this new Sentra away for just $12,260.

Mike summarized the program, "It has made business a lot more normal".

Gary at Folsom Lake Ford clued me in that they had collected 40 clunkers for the program so far.

"It's huge", he explained.

This is a strange govenment program. Its new, but it should serve the average American citizen in a couple of ways.

  • Helps poor people.
  • Helps state tax revenue (California collects an 11% tax on new cars.)
  • Helps car dealerships
  • Helps air quality
  • Helps gas prices: Even a small decrease in the total fuel needed to drive America's fleet of cars could have a huge impact on the price of gasoline. The supply of gasoline is very, very stable, and the demand is extremely inelastic. The combination of these two factors mean that when demand goes up a little, as it did in the summer of 2008, the price goes up like crazy. Even at $4.60 per gallon, consumers simply don't have an easy option except to pay the new price. By the end of 2008, with the economy withering, demand for fuel dropped, kicking the legs out from under the price of gasoline. The cash for clunkers program will help keep the price of gas low by getting 250,000 gas guzzlers off of the road.


What to bring to the Dealer to qualify:

  • 1 Year Proof of Insurance. If your insurance card does not cover the entire year preceding the trade in, you will need other proof of insurance. Contact your insurance company to get evidence of 1 year worth of insurance. The form must include, at a minimum, the insurance company, policy number, VIN, start and end date of insurance (showing at least 1 year).
  • Proof of Registration going back at least 1 year.
  • “Clear” title. This means the title must be free of any liens or other encumbrances. If you have liens, you need to get these cleared before going to the dealer. This may include evidence on the face of the title showing no lien; that the title has been cleared (signed and stamped accordingly), or with an attached lien release from the lien holder. I was unable to determine if a "salvage" title would qualify. I'm guessing that it would, as the law specifies "clear" title, not a "clean" title.
  • The vehicle manufacturer date (found on the driver’s door or door jamb) is less than 25 years from the date you trade it in.

If you do not have any of the above items in your possession, you may do the following:

  • Call your insurance company and have them provide evidence of 1 year’s worth of insurance on the trade-in vehicle. Make sure it includes the minimum requirements noted above.
  • Contact your DMV for copies of prior registration certificates to show proof of ownership of the trade-in vehicle for at least the past year. The name on the registration must be the same as the name on the title and the same as the purchaser of the new vehicle.
  • Clear your title by paying-off any loans outstanding and receive either a newly issued title from the DMV that is free of all liens and other encumbrances, or have the lien release document from the lien holder (signed and stamped accordingly), or your title signed and stamped accordingly (showing it is clear).

Once you are at the dealer you will be asked to certify to the following under penalty of law. The above documents will provide proof to the dealer to assist in this certification process.

  • The trade-in is in drivable condition.
  • You are the registered owner, and have been for the least the last year.
  • The trade-in has been continuously insured for the last year.
  • The trade-in is titled in your name and has been for the last year.
  • You have not previously participated in the CARS program.

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