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"Cash for Clunkers" Rebate Program Gets Rolling

July 29, 2009

The so-called "Cash for Clunkers" program formally took effect on July 24, offering up to $1 billion in rebates to U.S. residents who trade in their older cars and trucks for more efficient vehicles. The new program, which the U.S. Department of Transportation (DOT) calls the Car Allowance Rebate System (CARS), covers sales or leases starting on July 1, and is scheduled to run through October 31 or until the funding runs out. Rebates range from $3,500 to $4,500, depending on the fuel economy of the vehicles involved, and the DOT estimates that the program will remove from the roads about 250,000 inefficient vehicles. The DOT will hold a Webinar for car dealers on Monday, July 27, and has established a toll-free hotline for consumers at 866-227-7891. See the DOT press release and the CARS Web site.

Generally, to qualify for the rebate, the vehicles must not be older than 25 years, must be drivable, and must have a combined fuel economy of 18 miles per gallon (mpg) or less as certified by the U.S. Environmental Protection Agency. New vehicles must have a combined fuel economy of at least 22 mpg, while new sport utility vehicles and small and medium-sized pickup trucks and vans (collectively called "Category 1 trucks") must have a combined fuel economy of at least 18 mpg. To earn the maximum rebate, the new cars must have a combined fuel economy of at least 10 mpg higher than the traded-in cars. A Category 1 truck earns the maximum rebate with a 5 mpg improvement over the surrendered truck. Under CARS, all vehicles traded in must be junked, though some parts may be salvaged. The DOT issued the final rule for the program on July 24, and published it in the Federal Register on July 29. For a complete rundown on the program, see the article from this newsletter and the DOT final rule.