July 29, 2009 -- "Cash for Clunkers." A lot of Americans have been hoping their old cars (or trucks or other vehicles) were eligible for a fat government rebate if they traded them in under the new program -- and some of them have been unpleasantly surprised.
The program is off to a fast start. In less than a week, 8,000 cars have been traded in for new ones -- deals that might not have happened if Washington were not offering people $3,500 to $4,500 to get their aging gas guzzlers off the road.
But does the old heap in your driveway qualify? And what do you get if it does? Turns out, under standards implemented by the Environmental Protection Agency, cars that might have qualified for the program a few weeks ago may no longer meet the payout qualifications.
The government's official listing of eligible vehicles can be found at FuelEconomy.gov. The site lists almost every vehicle sold in America since the 1984 model year. The program is officially called CARS -- Car Allowance Rebate System -- but "Cash for Clunkers" is the name that's caught on.
A reminder of how the program works:
The car you're trading in must be less than 25 years old -- made in the summer of 1984 or later (you can find the manufacture date on a sticker found on the frame of most vehicles' drivers' doors). The vehicle must be listed by the government as getting combined highway/city fuel efficiency of 18 miles per gallon or less.
The vehicle must have been insured and registered to you for the past year, and it must be in drivable condition.
If you trade it in for a car that improves your fuel economy by four miles per gallon or more, your reward is a $3,500 voucher, which you can apply toward the cost of a new car.
If you switch to a vehicle that gets 10 miles per gallon more in fuel efficiency, then the government gives you $4,500.
So, for example, if you're trying to unload a 2002 Ford Explorer with four-wheel drive, it's listed as getting 14 miles per gallon, and FuelEconomy.gov will brightly tell you, "Yes. You may qualify for the CARS program."
If you trade it for anything that gets more than 24 miles per gallon, you get a $4,500 voucher.
But the program has caveats galore. The EPA has been tweaking the list of eligible cars, as required by the law that set up the program, reviewing the mileage ratings for 30,000 models so they'd be accurate down to four decimal places. All of a sudden, the 1989 Ford Taurus station wagon qualifies as a gas-guzzler (it didn't last month) -- but the 1991 Toyota Camry sedan does not.
'Cash for Clunkers' Program Has Limits
It's also a good idea to look up the likely trade-in value of your old vehicle, at sites such as the Kelley Blue Book. If it's in decent shape and worth more than $4,500, you'll actually do better to trade it in the old-fashioned way. The government is trying to get those old gas guzzlers off the road, and the voucher makes up for what you might have gotten for trading it in.
Some environmentalists are against the new law. They point out that it will end the lives of perfectly serviceable vehicles with years of life left. One way to be green is to get a more fuel-efficient car --but another is to "recycle" a car by buying used.
How to Save More
From a strictly consumer standpoint, some experts contend the Cash for Clunkers program is not a great deal. Yes, if you are bent on buying something brand new, you will save money. But the savings are nothing compared with how well you can do by buying a used car.
New cars typically depreciate 20 to 30 percent in just the first year, according to the auto Web site Edmunds.com. By year three, their value is down an average of 45 percent.
Edmunds says the average sale price of a brand new car is $27,800, whereas the average price of a used car is $13,900. That's a savings of roughly $14,000 achieved simply by letting somebody else be the chump who buys the brand new vehicle.
Still want to be green? There are plenty of three-year-old vehicles with excellent fuel economy. The technology hasn't changed much in the past few years. It's also a great time to buy used because cars and trucks are increasingly reliable these days. They can easily chug along for 200,000 miles with few problems.
So you decide. Would you rather save $4,000? Or $14,000?