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President Obama just signed the Car Allowance Rebate System (C.A.R.S.) or Cash for Clunkers Program, a rebate program intended to make the U.S. auto fleet more fuel efficient by giving a credit of up to $4500 (the credit is generally $3500 or $4500, depending on the type of vehicle you trade in and how much more fuel efficient the new vehicle is) to consumers for trading in older gas-guzzlers for new, more fuel efficient vehicles.

What qualifies as a clunker?

• Must be a drivable vehicle, produced in the last 25 years

• The car must get 18 miles a gallon or less.

• It must be a registered vehicle, and have been insured for the past year. (To eliminate people buying junk yard cards to trade in.)

How much is the rebate and what are the other rules?

• For passenger cars, the new vehicle must get 22 mpg to qualify, and the consumer would get $3500 in the new vehicle’s mileage is 4 miles more per gallon, and $4500 if it is 10 more miles per gallon than their old vehicle.
• For light trucks and SUV’s, the new vehicle must get 18 mpg, and the consumer would be $3500 for a 2 mpg gallon increase and $4500 for an increase of 4 mpg or more.
• Price of new vehicle cannot exceed $45,000
• It can be used for the purchase or lease of a new vehicle, provided the lease period is at least five years.


Additional details:
The new vehicle must also achieve minimum combined fuel economy levels. For passenger automobiles, the new vehicle must have a combined fuel economy value of at least 22 miles per gallon. For category 1 trucks, the new vehicle must have a combined fuel economy value of at least 18 miles per gallon. For category 2 trucks, the new vehicle must have a combined fuel economy value of at least 15 miles per gallon.( A category 1 truck is a nonpassenger automobile. This category includes sport utility vehicles (SUVs), small and medium pickup trucks and small and medium passenger and cargo vans. A category 2 truck is a large van or a large pickup truck, based upon the length of the wheelbase (more than 115 inches for pickup trucks and more than 124 inches for vans). Note: some pickup trucks and cargo vans exceeding these thresholds are treated as category 3 trucks instead of category 2 trucks. A category 3 truck is a work truck and is rated between 8,500 and 10,000 pounds gross vehicle weight. This category includes very large pickup trucks (those with cargo beds 72 inches or more in length) and very large cargo vans.)

The value of the credit for the purchase or lease of a new passenger car depends upon the difference between the combined fuel economy of the vehicle that is traded in and that of the new vehicle that is purchased or leased. If the new vehicle has a combined fuel economy that is at least 4, but less than 10, miles per gallon higher than the traded-in vehicle, the credit is $3,500. If the new vehicle has a combined fuel economy value that is at least 10 miles per gallon higher than the traded-in vehicle, the credit is $4,500.

Will it work?

The program is getting mixed reviews, to say the least. It is limited to $1 billion in total rebates, which sounds like a lot, but will have a limited impact. It also extends only to November 1, so it will be a limited time frame as well. Another popular criticism is based on the fact that consumers who are driving a car worth less than $4500 will likely not be able to afford the sticker price on a brand new car.

For more information visit the official government  C.A.R.S. site (It will be updated regularly as well.)

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