08.24.2009 / Cash for Clunkers... is this something for me?
If you have been watching the news lately, you have probably heard about the mounting interest in the cash for clunkers program, but do you really know what it is and if it is something that you should consider? With an extra 2 billion dollars for the program signed into law on August 7, 2009, there is a lot of attention on the program.
"Vouchers are worth either $3,500 or $4,500, depending on several factors."
Basically, the government’s "Car Allowance Rebate System" (CARS) provides about $3 billion to jump-start car sales and get older gas guzzlers off the road. The program started July 1st and will run until November 1st 2009 or until all the funds are used up, whichever comes first. Eligible cars can be traded in for a voucher redeemable toward the purchase of a NEW, more fuel efficient vehicle. Vouchers are worth either $3,500 or $4,500, depending on several factors, including the difference in fuel efficiency between the old and new vehicles.
Sounds like a really great deal, but is it right for you? Take a look at some of the questions below that may help you answer this question.
In order to qualify your trade-in vehicle must meet the following requirements.
Must have been manufactured less than 25 years before the date you trade it in.
Have a "new" combined EPA city/highway fuel economy of 18 miles per gallon or less.
Be in drivable condition.
The vehicle must have been continuously insured and registered to the same owner for the full year preceding the trade-in.
Also, the new vehicle you purchase must have a manufacturer’s suggested retail price that is less than $45,000. That price appears on the window sticker on new vehicles. The new vehicle must also achieve minimum combined fuel economy levels. For passenger automobiles, the new vehicle must have a combined fuel economy value of at least 22 miles per gallon.
Consumers can visit the program website at www.cars.gov. Also, you can check out your cars fuel economy on http://www.fueleconomy.gov/feg/findacar.htm to see what your car’s estimated miles per gallon is.
Yes, the CARS program credit can be used in addition to any rebates or discounts offered by the dealership.
Yes, you can combine this with other State and Federal incentives, like the hybrid vehicle credit. For more information on this incentive visit, http://www.fueleconomy.gov/Feg/tax_hybrid.shtml.
In order for the program to make financial sense, your current vehicle should have a trade-in value that is well under the offered credits, $3,500 or $4,500. Also, when you decided to use the CARS program, you are choosing the automatic credit instead of negotiating with the dealer on a trade-in-value, which could or could not be greater than the CARS credit.
The CARS program may have particular appeal to those who own a vehicle that is older and less efficient. A car that will require major mechanical repairs, for example, may be more expensive to repair than the vehicle is worth. Plus, this type of vehicle is more than likely hard to get rid of too. That’s why the Cash for Clunkers program helps provide a way for individuals to get out of their old car and help assist them in getting into a newer more efficient car.
Chances are consumers drawn to this program have an older car and are most likely to hold on to vehicles for many years, so they can get the most out of the vehicle. This is the ideal profile for a late-summer shopper who could take advantage of year-end clearance sale on a 2009, and not worry about the rapid decline on a 2010 model.
Also, someone who drives their car until it is nearly worthless is obviously a very prudent and penny-wise individual either by nature or by choice. With new car prices averaging around $28,000, it may be necessary for you to take out a loan to finance the new car. That’s why you will need to consider your comfort level of a new car payment and the personal risk of a new car loan commitment. It may be that the more economical decision, especially during this rough economy, would be to consider purchasing a used car which would be cheaper; however, you would then not be eligible for the CARS credit.
What are your thoughts on the CARS credit? Have you or will you take advantage of the credit program to purchase a new car in the near future? We want to hear from you.
*Sources and content from ConsumerReports.org and Cars.gov.