Dealerships Give 'Cash For Clunkers' A Jump-Start

Wrecking yard owner Alice Corns pictured in July in front of a car crusher. i i

hide captionWrecking yard owner Alice Corns stands to benefit from the "cash for clunkers" program because the law requires that gas-guzzling cars brought for trade-in be destroyed so they won't end up back on the road.

Jeff Brady/NPR
Wrecking yard owner Alice Corns pictured in July in front of a car crusher.

Wrecking yard owner Alice Corns stands to benefit from the "cash for clunkers" program because the law requires that gas-guzzling cars brought for trade-in be destroyed so they won't end up back on the road.

Jeff Brady/NPR

Resources

A brief synopsis of the CARS program can be found here.

Congress has allocated $1 billion for a program to encourage people to trade in older, gas-guzzling cars and trucks for new, more efficient ones.

Officially it's known as the Car Allowance Rebate System (CARS). But most people refer to the program as "cash for clunkers."

It's designed to help struggling auto manufacturers sell more cars. A secondary goal is to improve the environment by removing from American roads vehicles that get less than 18 miles per gallon.

The more efficient the new car is, the more money you can get from the government program. For example, if a new car gets 4 mpg higher than that "clunker" being traded for it, you qualify for a $3,500 voucher; 10 mpg and the government will pay you $4,500.

A dealer will take your old car and send it to a wrecking yard, where it will be destroyed. That means if your car is worth more than $4,500, this isn't a good deal for you.

Wrecking yards are gearing up for the extra business. In a Denver suburb, Alice Corns has been calling auto dealers to let them know she can take "clunkers" off their hands. Corns is president of Colorado Auto & Parts. She's disappointed the law restricts her from selling engines and drivetrains from the old cars.

"For a lot of recyclers, selling a good running engine is ... where their money comes from, so that puts a bit of hurt on the industry," Corns says.

The U.S. Department of Transportation was set to release rules governing the program Friday, but dealerships have already been using it as a tool to sell cars.

"We've actually been doing some cash for clunker deals already," says Fred Emich IV, general manager of Emich Volkswagen in Denver. Emich says customers came in asking about the program, and he didn't want to risk losing sales to other dealerships.

Emich was surprised to learn that most of the customers were middle-class folks with good credit ratings — usually thrifty people who kept their cars for a long time.

"I was expecting low-income, poor credit," says Emich. "It has been the complete opposite." He says a few of the customers paid cash for their new cars.

The law includes provisions to make sure someone doesn't go out and buy an old car just to take advantage of the program. Customers must have owned the car for at least a year and kept it insured.

The program runs through Nov. 1 or until the $1 billion appropriated for it runs out.

'Cash For Clunkers': Is Your Car Eligible?

Eligible Trade-In Vehicle Or 'Clunker'

Car, light truck or large light-duty truck:

- With combined (hwy/city average) fuel economy of 18 mpg or less, which can be found by visiting www.fueleconomy.gov

- Manufactured less than 25 years since the date of the trade-in.

Category 3 Work Truck

- An 8,500 to 10,000 pound GVW work truck model year 2001 or older.


Ownership Requirements

- Is in drivable condition.

- Continuously insured consistent with applicable state law.

AND

- Registered to the same owner for a period of not less than 1 year immediately before such trade-in.


New Vehicle Requirements For $3,500 Credit

New Passenger Car:

- Must achieve a combined (highway/city) fuel economy improvement of at least 4 mpg (minimum of 22 mpg) above the trade-in.

New Light-Duty Truck:

- Must achieve a combined (highway/city) fuel economy improvement of at least 2 mpg (minimum of 18 mpg) above the trade-in.

New Large Light-Duty Truck (6,000-8,500 pounds GVW)

- Must achieve a combined (highway/city) fuel economy improvement of at least 1 mpg (minimum of 15 mpg) above the trade-in.

Category 3 Work Trucks (8,500-10,000 pounds GVW):

- No fuel economy requirement.


New Vehicle Requirements For $4,500 Credit

New Passenger Car:

- Must achieve a combined (highway/city) fuel economy improvement of at least 10 mpg (minimum of 22 mpg) above the trade-in.

New Light-Duty Truck:

- Must achieve a combined (highway/city) fuel economy improvement of at least 5 mpg (minimum of 18 mpg) above the trade-in.

New Large Light-Duty Truck (6,000-8,500 pounds GVW):

- Must achieve a combined (highway/city) fuel economy improvement of at least 2 mpg (minimum of 15 mpg) above trade-in.

Category 3 Work Trucks (8,500-10,000 pounds GVW):

- No $4,500 work truck voucher


Effective Dates And Limitations

- Effective Late July 2009 through November 1, 2009*

*The National Highway Traffic Safety Administration (NHTSA) must finalize detailed rules and create an online system for dealers to complete these transactions. NHTSA has to complete the final rule 30 days after the bill becomes law.

- No customer income limitations under this program.

- New vehicle must be $45,000 MSRP or less.

- Limit one voucher per customer.

- Not more than one voucher may be issued for the joint registered owners of a single eligible trade-in vehicle.

- Excludes leases less than 60 months.


Scrappage Requirements

- Dealer must certify the old vehicle will not be resold for reuse as an automobile or truck in the United States or any other country.

- Dealer must transfer the old vehicle to an entity that will ensure the vehicle is crushed, shredded and not returned to road use.

These are the general guidelines as written in the bill. NHTSA must finalize specific rules for this process. For further program details, visit www.cars.gov.

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