Cash for Clunkers, not Junkers

July 27th, 2009

clunkers_spindled2Well, there’s big Internet noise about the opening of the government’s program to redeem your old (but not too old) car for cash. Formally called the Car Allowance Rebate System (CARS; clever, these acronymic bureaucrats), the Cash for Clunkers program has excited potential car traders everywhere.

There’s a happy story in the Chicago Tribune about the Musinski family, who finally brought themselves to part with their 1990 Ford Econoline van. “Belching black smoke and rusting from the wheels up, the once-rockin’ van—replete with curtains, a TV, and even a CB radio”—made its last mile to their local dealer. Worth about $300 street value and rated at 11 mpg, the clunker earned the Musinskis $4,500 on a 2009 Hyundai Accent, listing for $14,485. After discounts and the Clunker rebate, they paid $8,259, a helluva price for a new car.

If your trade meets the requirements (made within the past 25 years, drivable, rated at 18 mpg or less when new), you get a $4,500 rebate. Rated at 22 to 19 mpg, you get $3,500. There are some other twists and turns in the rules, so check with the CARS site.

Already dealers are complaining they can’t get on the website to register, some are getting rejected, and they don’t like the fact that they have to disable the clunker’s engine by running it for 7 minutes with sodium silicate instead of oil. They also don’t like the fact that they have to get the titles of the cars from the owners to get the federal reimbursement. To which we say, “Suck it up, dealers – the gravy train is over. You’re even getting reimbursed $50 for each car you disable.”

Some car companies are trying to throw blood in the water by adding their own rebates to the government’s. Chrysler is making much of its offer to add up to $4,500 or zero-percent financing for 72 months on Chrysler, Jeep, or Dodge vehicles bought by August 31, whether or not a trade-in qualifies for the CARS program. Mazda is adding a $500 cash incentive “if you qualify for the full Clunker rebate.” Toyota is offering special 60-month leases for the Clunker program with very attractive rates.

If you go the Clunker route, watch out for scams, and follow the Better Business Bureau’s advice:

  • Avoid anyone who offers a money order, check or direct deposit for the rebate. Car buyers can only benefit from CARS by getting the reimbursement amount reduced from the purchase price of the new vehicle.
  • Find the current value of the clunker on your own. If it exceeds $4,500, selling the clunker or a normal trade-in may be a more cost-effective route.
  • Know the scrap value of the clunker. If the dealership takes the gas guzzler, it may be able to sell a few specified parts, but the vehicle must be destroyed. Consumers can negotiate the new vehicle price with the clunker but it will only be worth the scrap value to the dealership. Dealerships are required to give consumers a scrap value estimate.

Remember, the CARS program is for new vehicles only.

Are you thinking about trading in a qualified clunker? Please tell us about it.

—jgoods

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  1. Red Oscar
    | #1

    Like the Musinski family, we traded in our 1990 Astro Van with 183,000 miles for a new Dodge Caliber. With the CARS credit and factory incentives, the Dodge was purchased at nearly 50% of the sticker price. Our Dodge dealer did great especially considering we were their first “clunker” deal. The only part of the paperwork that caused any problem was our need to stop by the County Clerks office to get proof we had registered the car for a full year. The clerk got a chuckle out of our request, and showed our registration history back as far as 1994 (the limit of their computer system). We love our new Dodge and feel this program was made just for us.

    p.s. We paid cash for the new car!

  2. lyn chiet
    | #2

    I have been waiting for this incentive to come about! We have a 1995 Saab 900 that has an average mpg as per the gov. chart of 21. in this article you state that 22 to 19 mpg, you get a 3,500.00 allowance! Is this accurate, I hope so…..did not see this info. in the gov. info. Please advise!

  3. | #3

    @lyn chiet
    In order to qualify for a voucher your car has to get 18mpg or less according to the gove. chart. If yours doesn’t qualify, you can donate car charity and get a tax deduction instead. Details at http://www.cars4charities.org.

  4. jgoods
    | #4

    @lyn chiet
    Lyn, the government just revised its rules on this, and I can’t find complete or accurate mileage rating information. USA Today (see http://www.usatoday.com/money/autos/2009-07-27-cash-for-clunkers-list-changes_N.htm) had this:

    “To qualify for the $1 billion program aimed at spurring auto sales and driving gas guzzlers off the road, the clunker must have an EPA city-highway “combined” rating of 18 miles per gallon or lower.

    Buyers then get a $3,500 incentive if the new car gets 4 to 9 mpg more or $4,500 for 10 mpg or more. The new car also must itself have a minimum 22 mpg combined rating. The program ends Nov. 1, or when the $1 billion runs out.”

    Government recently changed the list of which cars qualify, further confusing everybody. To check your rating, go to http://www.fueleconomy.gov/.

  5. | #5

    Do you really want to know what this program is doing? Well first the idea to destroy vehicles that currently are in good running condition for the benefit of a $4500.00 vochure for a SMALL percentage of the American public( 222,222 = 1 Billion divided by 4500)results in the following:

    Vehicles for $4500.00 or less make up a large portion of the on road vehicles, owners of these vehicles buy gas, oil, insurance, new and used auto parts. So the gas station owner,used parts yard, autoparts store, and insurance companies will all suffer along with the used car dealer and public auto auction business. People buy used vehicles for a reason AFFORDABILITY. When you remove a 2000 Dodge Durango(a $3500.00 vehicle at auction/$5500 retail) and it becomes scrap, somewhere an employee of one or all these business types jobs gets jeapordized. So with each car sold and scrapped under this program American jobs are at risk. Is this good or am I the only one who sees this program as destructive to the American dream of business ownership as well as jobs.
    When the used car dealers stock starts to dry up, then the next group of vehicles the used car dealer buys prices will jump extremely high due to high demand / low supply.
    So for the people who can’t get financed at the New Car dealer and want affordable transportation, they will be footing the bill for the 222,222 CARS program buyers that got new cars without the benefit of the trickle down theory for used car buyers. If we remove all the old cars we will need mass transit for the largest part of working Americans who can’t get bank financing.
    You better think before you trade, this is not a profitable deal ,even for the new car dealer who now has more Gov. paper work for every deal, not to mention the possibility of no vochure money if the multiple pages of Gov. paper work are done inncorrectly. As with all good deals there are strings attached and jobs will suffer when the Gov. tries to become a business.

    Plus unless you have a spare $4500.00 in reserve to pay back the dealer if your deal goes south, this is just a Gov. game to stir/spin the econmy into more debt, remember the $4500 per vehicle has to come from somewhere ….like TAXES???????????

    at least a BILLIONs worth as of today…………..

  6. | #6

    So far, I’m very happy with the Cash for Clunkers program. Not only does the program give a hand to the auto industry, but a related benefit is that when the true “clunkers” are junked, it means an increase in business for auto recyclers too.

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