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How to Trade In Your Car With Cash for Clunkers

Believe it or not, the long-awaited (and debated) Cash for Clunkers program (a.k.a. CAR Allowance Rebate System [CARS]) is here—while the money lasts. Under the cash for clunkers program, the government will give you a voucher for up to $4,500 for qualifying used vehicles that can be used to purchase a new car. It’s a great deal if you can get it. First, your car must qualify. Second, you’ll have to get your act together before November 1, 2009 or the $1 billion allotted for the program runs out, which some analysts forecast could be by the end of August!

Are You Eligible for Cash for Clunkers?

Just because you drive a beater doesn’t mean that your car will qualify for this program. To qualify:

  • Your trade-in car must be no more than 25 years old
  • Most trade-in cars must get 18 MPG or less (with some exceptions)
  • Your trade-in car must have been registered and insured for a full year preceding the trade
  • You must agree to scrap your old car (i.e., you cannot sell it for its full value and collect the rebate

In addition to these requirements, to qualify for the cash for clunkers rebate, you must

  • Purchase a new vehicle (not used) from a participating dealer
  • Purchase a vehicle that meets fuel economy requirements

How to Get a Cash for Clunkers Rebate

To participate in the Cash for Clunkers program, simply take your qualifying trade-in auto to a dealer. Once you select your new car, the dealer will apply the applicable credit at the time of purchase. You do not need to register for a voucher; the rebate is given at the dealership. When you visit the dealership, be sure to ask about the scrap value of your vehicle. Although it won’t be much, dealers are required to pay you the scrap value of your car in addition to the rebate.

Should You Buy a New Car With a Cash for Clunkers Rebate?

That all depends. Getting up to $4,500 in trade value for a car that is otherwise worthless is a great deal, but only if you can afford to buy a new car. Even the most basic new cars cost about $10,000 plus taxes and registration fees, so you’ll be looking at fronting more than $5,000 in cash. Ask yourself: How long will your current vehicle last you? If you’re pretty sure you’ll need to pony up for a new ride in a year or two anyway, it might be wise to check out cash for clunkers. Will you make it more than a couple years? It might be best to keep on clunking.

You can learn more about the CAR Allowance Rebate System (CARS) at CARS.gov.

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. The Cash for Clunkers voucher is great if you are already looking to buy a new car. It’s important to remember that getting a good deal on a new car doesn’t automatically mean that you can afford it. I almost tradeed in my clunker, but decided to pass it up because I would ultimately be spending money to save money, which nets a loss.

    I don’t need another car payment, and when my clunker dies in the near future, I will probably buy a used car for a lot less than the price a new car with the voucher.

    Don’t get suckered into buying something you can’t afford because it’s on sale.

    -Dan Malone-

  2. While this looks like a great deal on the surface, you should take into account whether or not you can pay cash for the car. A car payment and interest that you pay on it would make that rebate worth a lot less money. Another factor to consider is your depreciation factor.

    The best bet is to get a quality used car when you have enough cash to pay for it. If you have enough cash to buy the car new, then the rebate may help to balance out the depreciation hit that you will take.

  3. Many cars won’t qualify for a voucher because of the mpg requirement or because they don’t run. In that case, a good option is charity car donation. By donating your car to charity, you’ll get a tax deduction and the charity will get the proceeds from its sale.