Cash for Clunkers: How It Works

If this thing runs, it's eligible for Cash for Clunkers. (Photo: dave_7 [CC BY 2.0]/Flickr)

The Cash for Clunkers program, formally the Car Allowance Rebate System (CARS), goes into effect today, and if you have an old, gas-guzzling bomb taking up space in the garage you should seriously think of trading it in. What’s in it for you? How about $4,500 that can be applied to the purchase of a new and much cleaner car?

There are, of course, conditions, but for the most part they make sense. The most serious drawback is that the small amount of funding—just $1 billion — means that less than 250,000 cars can get rebates. The number is variable because it’s a two-tier system: If the new car is at least 10 mpg more fuel efficient than the old one, you qualify for the full rebate; if it’s at least four mpg better, the rebate is $3,500. There are other rules for larger trucks, some of which have no fuel efficiency rating.

And the loser cruiser you trade in, be it a honkin’ SUV or a “full-sized” two-ton boat, has to get 18 mpg (combined) or worse. If you don’t know your mileage, you can look it up at The complete rules for the program — and a list of eligible trade-ins — are at the official website at

Here are a few Cash for Clunkers rules to live by:

  • The trade-in can’t be more than 25 years old;
  • You have to use the rebate for a new vehicle, but you can lease instead of purchase;
  • The car has to have been registered and insured in your name continuously for a year before you make the trade. You can’t buy a $50 car and make $4,450 from it;
  • Your old car will definitely get squashed — the program requires the engine and transmission to be disabled. The upside is that you get the scrappage fee, minus $50 for the dealer.
  • Apply early. Judging by the considerable public interest — just look at some of the Internet postings about the program, many of them inaccurate. The program could run don’t need. No advance paperwork is required before the deal is signed, sealed and delivered.
  • Go for the larger rebate. There’s a wealth of great cars out there that get at least 30 mpg on the highway, and some of them are very affordable. Trust me on this: Gas prices are going to go up again.

If Cash for Clunkers is a roaring success, Congress could put more money in and extend the deadlines, but the small size dictates it’s unlikely to be as stimulating as, say, Germany’s program, which caused a 40 percent rise in new car sales. So, as we said in the 60s, seize the time and crush that clunker now.