"Cash for Clunkers" Rebate Program Gets Rolling

The federal program will remove an estimated 250,000 inefficient cars from the road.

| July 30, 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 DOT estimates that the program will remove from the roads about 250,000 inefficient vehicles.

Generally, to qualify for the stipend, 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 mph 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, but the rule has not yet been published in the Federal Register.


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