Recently, the Car Allowance Rebate System (CARS), or Cash for Clunkers program as it has become affectionately known, has gone into affect. The goal of the program is to remove older, inefficient automobiles from America’s roadways by offering a federal discount, by way of a voucher, on new automobiles. It’s also hoped that the program will help stimulate the struggling auto industry.
In order to be eligible for Cash for Clunkers there are some requirements your automobile must meet. First, the car has to be running — not necessarily in mint condition, but it must be able to make it down the block. In addition, your automobile must be model year 1984 or later, but be at least 10 years old. Because the program is geared toward reducing emissions, your old car must get no better than an average of 18 miles per gallon — combined highway and city driving. It’s best not to guesstimate your vehicle’s average. You can visit fueleconomy.gov to locate the model of your car and follow the simple instructions to determine its average fuel use. Finally, the automobile you buy must be registered and insured in the purchaser’s name for at least one year.
As the purchaser of a new automobile, you may qualify for one of two vouchers to be used toward the purchase of a new automobile. The first voucher is in the amount of $3,500, and may be used toward the purchase of a new car, small light-utility truck or large light-utility truck. If you’re interested in purchasing a new car, the new vehicle must represent an improvement of at least 4 miles per gallon over your trade-in, and it must have a sticker price of no more than $45,000. Individuals interested in purchasing a small light-duty truck, must improve the miles per gallon by 2 over the trade in. For a large light-duty truck, the improvement must be at least 1 mile per gallon. The $4,500 voucher has similar requirements. To qualify for the larger amount, a passenger vehicle must improve by 10 miles per gallon over the trade-in, a small light-duty truck must improve by 5 miles per gallon, and a large light-duty truck must improve by 2 miles per gallon over the trade-in.
The window of opportunity to take advantage of the Cash for Clunkers closes November 1, 2009. The government has established a fund of $1 billion for the program, but it’s believed that once that money has been exhausted, no additional funds will be allocated. Overall, while the program has its merits, I urge you to be cautious. If you’re interested in taking advantage of Cash for Clunkers, you should first make a budget to ensure that you have at least 10% of your net monthly income – that is, funds remaining after taxes and other deductions – to set aside for a new car payment. You don’t want to buy a new car and later discover that the monthly payments leave you no room for the other things you need. To learn more about Car Allowance Rebate System (CARS), please visit cars.gov.
For more information, or to speak with a certified credit counselor please contact Cambridge Credit Counseling at 800-897-2200 or www.cambridgecredit.org.