Trade In Your Used Car and Save Big with CARS Program

In an effort to jump start the ailing auto industry while at the same time helping the environment, the federal government initiated the Car Allowance Rebate System, or CARS, program.

Most-often referred to as ‘Cash for Clunkers,’ the CARS program provides a $3,500 or $4,500 credit toward the purchase or lease of a new vehicle if the new vehicle offers a better fuel economy than the trade-in vehicle.

The program is slated to last until Nov. 1, 2009 or until the program’s funding runs out. However, the program was so popular in its first week that the initial funding actually ran out by the end of that week. The government quickly reinstated the program, putting another $2 billion toward the program.

How the Cash for Clunkers Program Works

Combined Fuel Economy

The primary caveat for the ‘Cash for Clunkers’ program is the new vehicle needs to provide a better combined fuel economy (city and highway) than the trade-in vehicle. The greater the jump in combined fuel economy between the new and old vehicle is, the greater the trade-in credit will be.

To determine the minimum required fuel economy difference, the program divides vehicles into four categories.

Most vehicles will fall into the general category. This category is defined as passenger vehicles that were manufactured primarily for transporting people and are not capable for off-highway operation.

Vehicles that do not fall into this general category, such as trucks and SUVs, are divided into three subcategories based on their gross vehicle weight rating and wheelbase. All work trucks automatically fall within the third category.

If you are considering trading in a truck or SUV, you can find out for which category your vehicle qualifies on the main CARS web site.

CARS Credit Amounts

As noted above, the greater the difference in combined fuel economy between the new and old vehicle, the more the CARS credit will be.

For vehicles that fall into the general category, a consumer can receive a $3,500 trade-in credit if the new vehicle is at least four, but less than 10, miles per gallon higher than the trade-in vehicle.

If the combined fuel economy of the new vehicle is at least 10 miles per gallon higher than the trade-in vehicle, the consumer can receive a $4,500 trade-in credit.

The required differences in the combined fuel economy for trucks and SUV are less than those for general category vehicles. Those requirements also can be found on the main CARS web site.

Other CARS Requirements

In addition to an improved combined fuel economy, there are other requirements that consumer must meet in order to qualify for the CARS program.

In order for a trade-in vehicle to qualify for the program, it must have been manufactured less than 25 years before the trade-in date. Category 3 Trucks (work trucks) must have been manufactured no later than model year 2001.

In addition, the trade-in vehicle must be in drivable condition and must have been continuously insured and registered to the same owner for a full year prior to the trade-in date.

Finally, the trade-in vehicle must have a “new” combined fuel economy of 18 miles per gallon or less.

With regard to the newly purchased or leased vehicle, the new vehicle cannot pre-owned – it must be new. Additionally, the new vehicle base MSRP cannot exceed $45,000.