Car Allowance Rebate System (CARS) (a.k.a. ‘Cash for Clunkers’)

At the end of June, President Obama signed into law the “Cash for Clunkers” program or, as the National Highway Traffic Safety Administration is calling it, the “Car Allowance Rebate System (CARS)” (where would we be without acronyms!).

Whatever you call it, the program works like this: cars getting less than 18 miles per gallon (combined city/highway), owned, registered and insured for at least a year, and from 1984 model years and later can be traded in for new cars. The dealer pays (credits) the owner $3,500 (if the new car gets between 4 and 10 more miles per gallon) or $4,500 (if the new car gets 10 or more miles per gallon.) The dealer then is required to scrap the car so that it doesn't end up back on the streets. The dealer is then reimbursed by the federal government.

A few other interesting and important facts about this program:

• Customers do NOT have to register to take advantage of the program (there are no vouchers, etc. and any such offers you might see are scams!), but dealers MUST register. The CARS Act expressly provides that the credit is not income for the consumer; however, the credit will be considered as income for the dealer. (We wonder: will this be a dis-incentive for dealers to participate?) While dealers can charge their normal types of fees, the CARS Act specifically prohibits dealers from charging a fee for purchasing or leasing a vehicle under the program.
• The CARS Act requires the dealer to use the credit under the CARS program in addition to any rebates or discounts advertised by the dealer or offered by the new vehicle’s manufacturer. The dealer may not use the credit to offset these rebates and discounts.
• Under the program, you may purchase a new vehicle or lease a new vehicle, provided the lease period for the new vehicle is at least five years.
• The manufacturer's suggested retail price of the new vehicle cannot exceed $45,000.
• The program runs from late July until November 1, 2009 or “whenever the funds are exhausted”. Exactly how this is determined is not yet outlined.

Coupled with the deduction of sales tax for new vehicle purchases, this program may make a new car purchase more enticing to some. But bear in mind that you should still consider the TOTAL costs of a new vehicle: payments, insurance, maintenance, etc., before signing on the dotted line.

More information can be found at the following websites:

• Official National Highway Traffic Safety Administration site for CARS (http://www.cars.gov)
• Information on the program at Edmunds.com (http://www.edmunds.com/industry-car-news/cash-for-clunkers.html)
• List of every car make, model and year that both qualifies for the program and is likely to be worth less than $4,500 at Edmunds.com (http://www.edmunds.com/industry-car-news/cash-for-clunkers-eligible-vehicles.html)
• The EPA's official Web site (http://fueleconomy.gov/feg/cars.shtml)