Gas Guzzler Rebate, Get Cash For Clunkers

By Pinyo, on June 27, 2009

The Cash for Clunkers Bill (aka. Gas Guzzler Rebate) entitles you to a $3,500 or $4,500 credit for trading a drivable car made within the last 25 years, with a combined city/highway fuel economy rating of 18 mpg or less to a new higher fuel efficiency car. If the mileage improvement is 4 mpg or better, you’ll get $3,500. If your improvement is 10 mpg or better, you’ll get $4,500.
clunker
Photo by mzacha from stock.xchng

How does the Gas Guzzler Rebate work?

You don’t have to do much to get the credit. Participating car dealers will apply a credit and reduce the price you pay at the time of your purchase or lease, assuming the vehicle you buy or lease and the vehicle you trade in meet the program requirements. The dealer will then obtain reimbursement from the government.

How will Cash for Clunkers Bill help our economy?

There are two primary benefits of this bill. First, it helps stimulate the auto industry by helping them sell 1 million new cars. Second, it helps the environment by removing inefficient cars with more fuel efficient ones.

What the oppositions are saying about the Bill?

Some people do not support this bill citing the following reasons:

It prematurely remove cars that are still functional from the road, and the pollution created during the process of manufacturing 1 million new cars may outweigh the benefit of removing 1 million inefficient cars.
Cash for clunkers will hurt car donations to charity because the amount of the voucher is so much greater than the tax deduction.

Additionally, I’ve dealt with many car dealers before and I am not sure it’s a good idea to place our bet on their honesty. I am sure it will be harder to negotiate a good price for your car once the Clunkers Bill goes into effect. The best bet is to not even mention that you have a clunker to trade in until you finish the negotiation.

What to do next?

If you want to take advantage of the program, you have to act fast because there are only 1 million vouchers available. To learn more about the program, check out the official Car Allowance Rebate System site at CARS.gov (you got to love the acronym)! To check if your car meets the fuel mileage requirement, visit the FuelEconomy.gov site.

Learn More

If you’d like to learn more, here are a collection of articles about the Cash for Clunker program.

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Pinyo is the brain behind Moolanomy personal finance blog and a few other web sites. If you like this article, please subscribe for free daily email updates.

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8 Comments

Jake Stichler
June 27, 2009, 19:26

Despite the fact that this would increase the value of my truck a trillion-fold (it being worthless), I still can’t see myself taking advantage of this only to lose that money as soon as I drive the shiny new one off the lot.
DivorcedDadFrugalDad
June 28, 2009, 10:27

I still see this ending badly in increased taxes, corruption, and scandal . . .

The car dealers are going to be involved? Oh boy! Let’s see, if we (the car dealers) raise the prices of the new vehicles, we can take the credit money right out of the pockets of the consumers . . . then we resell the clunkers to our brother-in-law (the local politician) who in turn resells them for a tidy profit . . .
karenc
June 28, 2009, 17:09

If your “clunker” does not qualify for a voucher, you can donate car to charity and get a tax deduction. Just call 866.448.3487 or log onto http://www.cars4charities.org.
Michelle
June 29, 2009, 14:54

I agree with Jake – if only this voucher would be valid for new-to-me (used) cars…the depreciation of new vehicles almost cancels out the value of this subsidy. And I completely don’t approve of government programs that are unfunded mandates at this point – we’ve too many commas in our national debt to be bribing folks to drive nicer cars for the sake of some nominal environmental benefit. And the benefit to the auto industry? Based on prior year and year-to-date market share, Toyota, Honda & Nissan will be getting more of a benefit than US-automakers… Click on New Vehicle Sales: http://www.motorintelligence.com/m_frameset.html
Rich R
June 29, 2009, 23:40

Being a professional in the automotive finance industry, I personally have mixed feelings about this program. Based on what I heard and read the vehicles that are being taken off the roads are suppose to be junked. How is the government going to regulate this? This is another prime example of how our government tends to push policies without fully examining the big picture. Unfortunately, I think this program will fail badly and it will hurt the auto industry further.
Matt Jabs
June 30, 2009, 0:49

Just what we need… more gov’t intervention. Where do they plan on getting this money from seeing that they’re already over $11,000,000,000,000 in debt?

Oh, this is so ridiculous… how embarrassing… our gov’t is so ridiculous!
Pinyo
June 30, 2009, 9:15

It’s interesting to see all the perspectives. It seems like most people agree that this was a bad idea. And after reading your perspectives, I tend to agree!
MLR
June 30, 2009, 14:38

There are some instances where the voucher will actually cover the depreciation.

In the post of mine that Pinyo linked I go over two such instances.

So if you are in the market for a 2 year old car and are currently driving a car that is a true clunker (worth less than a grand), it may be worth it to get a brand new car. IT MAY BE. Gotta run all of the numbers to find out!

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