Edmunds.com has put together this Cash for Clunkers FAQ page to track the program as it comes to fruition, and we'll be updating this space regularly as new information becomes available.
Though the legislation hasn't yet been made into law, we've provided some details of the current version of the proposed Cash for Clunkers program passed by the House. The program would offer vouchers that allow consumers to save up to $4,500 on a new-car purchase. There are also various credits, in the form of vouchers, for trucks and work trucks.
Though information from Congress suggests that the program may stimulate anywhere from 500,000 to 1 million new-car purchases, Edmunds.com believes that it will be a struggle to reach 500,000 vehicles, since the bill has become more restrictive in recent iterations .
"A program intended to stimulate new car sales should target people in the market for a car, but the program does not," asserted Edmunds.com CEO Jeremy Anwyl. "The only people who qualify are those willing to take no more than $4,500 for their current car and immediately buy a new one — quite a narrow profile."
The proposed bill still needs to pass through the Senate (which is still trying to pass its own version of the bill), but the president has already expressed his approval of recent drafts. The House Committee on Energy and Commerce has put together a fact sheet (see below) to detail the key elements of the proposed legislation. We've followed that with an FAQ that we will continue to update as details emerge.
Committee on Energy and Commerce Fact Sheet: Cash for Clunkers
Consumers may trade in their old, gas-guzzling vehicles and receive vouchers worth up to $4,500 to help pay for new, more fuel-efficient cars and trucks. The program will be authorized for up to one year and provide for approximately 1 million new car or truck purchases. The agreement divides these new cars and trucks into four categories. Miles-per-gallon figures below refer to EPA "window sticker" values.
Passenger car or minivan: The old vehicle must get 18 mpg or less city/highway combined. New passenger cars or minivans with mileage of at least 22 mpg are eligible for vouchers. If the mileage of the new car is at least 4 mpg higher than the old vehicle, the voucher will be worth $3,500. If the mileage of the new car is at least 10 mpg higher than the old vehicle, the voucher will be worth $4,500.
Light-duty truck: The old vehicle must get 18 mpg or less city/highway combined. New light trucks or SUVs with mileage of at least 18 mpg are eligible for vouchers. If the mileage of the new truck or SUV is at least 2 mpg higher than the old truck, the voucher will be worth $3,500. If the mileage of the new truck or SUV is at least 5 mpg higher than the old truck, the voucher will be worth $4,500.
Large light-duty truck: New large trucks (pickup trucks and vans weighing between 6,000 and 8,500 pounds) with mileage of at least 15 mpg are eligible for vouchers. If the mileage of the new truck is at least 1 mpg higher than the old truck, the voucher will be worth $3,500. If the mileage of the new truck is at least 2 mpg higher than the old truck, the voucher will be worth $4,500.
Work truck: Under the agreement, consumers can trade in a pre-2002 work truck (defined as a pickup truck or cargo van weighing from 8,500-10,000 pounds) and receive a voucher worth $3,500 for a new work truck in the same or smaller weight class. There will be a finite number of these vouchers, based on this vehicle class' market share. There are no EPA mileage measures for these trucks; however, because newer models are cleaner than older models, the age requirement ensures that the trade will improve environmental quality. Consumers can also "trade down," receiving a $3,500 voucher for trading in an older work truck and purchasing a smaller light-duty truck weighing from 6,000-8,500 pounds.
s.
| Summary of Cash for Clunkers Agreement | |||
| Minimum Fuel Economy for New Vehicle | $3,500 Voucher | $4,500 Voucher | |
| Passenger Car or minivan | 22 mpg (EPA combined) | Mileage improvement of at least 4 mpg | Mileage improvement of at least 10 mpg |
| Light-duty truck | 18 mpg (EPA combined) | Mileage improvement of at least 2 mpg | Mileage improvement of at least 5 mpg |
| Large light-duty truck (6,000-8,500 pounds) | 15 mpg (EPA combined) | Mileage improvement of at least 1 mpg or trade-in of a work truck | Mileage improvement of at least 2 mpg |
| Work truck (8,500-10,000 pounds) | Trade-in must be at least pre-2002 | ||
FAQ
How much are the vouchers worth? This will depend on the car you are turning in and the type of car you buy. In general, if the improvement in fuel economy between your old car and the car you buy is 10 mpg (combined highway mileage according to the EPA), the maximum credit will be $4,500. The requirement for improvement in fuel economy for trucks is lower. For specifics, see the above chart.
How old does my car need to be? Eligible vehicles must be manufactured in model year 1984 or later. For work trucks however, any model built before 2002 is eligible. We anticipate that most cars traded in will likely be model-year 2000 and older.
What types of vehicles qualify? In general, this bill aims to take polluting gas-guzzlers off the road. The vehicle must have a federal combined city/highway fuel economy of 18 or less miles per gallon. This means that many American-made cars and trucks will be eligible for vouchers toward the purchase of new vehicles. The categories of vehicles that will qualify fall into four classes: passenger cars, light-duty trucks, large light-duty trucks (6,000-8,500 pounds) and work trucks (8,500-10,000 pounds).
What kind of mpg will the new vehicle need to get? Different levels of improvement are required for each type of vehicle. In passenger cars, if mileage is improved by 10 mpg, the $4,500 voucher is awarded; if fuel economy is improved by only 4 mpg, the $3,500 voucher is awarded. The mileage improvement levels and voucher amounts for the different classes of trucks are listed in the chart above.
The proposal mentions a one-year time limit. Is there a cap on the number of vehicles? The bill is written to provide vouchers for 1 million purchases. Since there is a one-year limit, consumers who are interested in taking advantage of this program should track the progress of the bill and apply for a voucher as soon as funds become available. There is a special provision in the bill that requires that no more than 7.5 percent of the funds for the program shall be used for work trucks.
How long do I need to have owned the vehicle I'm trading in? The vehicle must be insured and registered in your name and in use for at least one year.
If I have an older car that is in good running condition, or a classic car, is it mandatory for me to turn it in? No. This program is completely voluntary.
What happens to the car that you trade in? The dealer is responsible for sending the vehicle to a disposal facility. The entire vehicle will be crushed or shredded so that the car does not end up on the road again.
How will this affect used-car values? Since the "clunkers" will be taken off the road, there will be fewer older vehicles in the marketplace. However, our analysts don't expect this program to drastically affect used-car values.
Where do I find the mpg numbers to see if my vehicle qualifies for the Cash for Clunkers vouchers? The EPA's combined mileage will be used. This is a combination of the highway and city mileage for vehicles. Models prior to 2008 will use the converted MPG numbers which take into account the new EPA testing methods. This information can be found on the window sticker of the car or at fueleconomy.gov.
Although many vehicles will qualify for the program, it may not always make financial sense to trade it in. We've compiled a list of eligible trade-in vehicles that average 18 mpg or less, and have a value of less than $4,500.
YEAR | MAKE | MODEL |
|---|---|---|
1996 | Honda | Passport |
1997 | Lincoln | Continental |
1998 | Chevrolet | Silverado |
1995 | Audi | A6 |
1996 | Toyota | Land Cruiser |
What kind of vehicles qualify as light-duty and large light-duty trucks? Trucks qualify based on class and vehicle weight. For example, the Ford F-150 would be considered a light-duty truck. If you are considering taking advantage of this program, look up your vehicle on Edmunds.com and determine its weight. If it is between 6,000 and 8,500 pounds and gets less than 15 mpg, you have a large light-duty truck and will need to buy a truck that improves your fuel economy by 1 mpg for a $3,500 voucher. If you select a truck that improves fuel economy by at least 2 mpg, you will qualify for the $4,500 voucher. A work truck is classified as being between 8,500 and 10,000 pounds. The only requirement for this class is that the trade-in vehicle needs to have been built before model-year 2002.
When is the program expected to go into effect, and will it be retroactive? Passage of this bill could come before the end of July and the vouchers would be available shortly thereafter. It will not be retroactive to any vehicle purchase made before the bill is passed. The current House legislation was folded into a broader energy package and was passed on June 9, 2009. Now it will go to the Senate, where it undoubtedly will go through further changes.
Where will the money for vouchers come from? Since President Obama wants this to move as quickly as possible, it is likely that the money will come from the already approved Troubled Asset Relief Program (TARP) funds and the economic stimulus package.
Does the voucher augment or replace what the dealer would give me for my trade-in? The money you receive from the Cash for Clunkers program will act as your trade in value. It cannot be combined with the dealer's trade in offer. This program is primarily designed to inflate the value of older vehicles worth less than $4,500.
Is there a limit on the price of the vehicle purchased with Cash for Clunkers vouchers? Vehicles purchased with the vouchers must have an MSRP of $45,000 or less.
How will the program be tracked? Via dealers or the DMV? Little information has been made available on this aspect of the bill. It is likely, though, that the Vehicle Identification Number (VIN) will be the prime tool in verifying information on the trade-in vehicle such as model year, engine size and the corresponding EPA-rated fuel-economy levels. The government has numerous databases with information on cars that are tracked through their VIN.
How will you get the money toward the trade-in? An electronic transfer from the government to the dealer will be issued once a vehicle is determined to be qualified for the Cash for Clunkers program. The voucher amount would be credited as all or part of the down payment on a qualifying new car.
Will it apply to used-car purchases? The final details of the bill are not yet available. However, it has always been assumed that the vouchers will only apply to new car purchases.
What if you're leasing a vehicle and wish to trade it in? Again, final details are not available. But it is unlikely that consumers who are currently leasing vehicles will qualify for this program.
What if you wish to lease the new vehicle? In this case, it appears likely that the voucher could be applied to a leased vehicle as a "capitalized cost adjustment." This would lower the price of the vehicle and thus reduce the monthly payment of a lease. In order for a lease to qualify, the term must be for no less than five years. However, we don't recommend getting into a five-year lease because of the additional costs.
I hear there is another version of the bill, how does this version differ? Senate Bill S. 1200, sponsored by Senator Dianne Feinstein, is a more environmentally focused alternative to the House version. The Senate version has a staggered voucher structure that increases the voucher's value based on the mpg improvement. The Senate bill also lowers the mpg requirement for cars and trucks, but raises the mpg limit on the new vehicle.
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