How Cash For Clunkers Program Works

By: Rob Adams
07/07/2009 11:13 AM ET

Government Incentive

The Cash For Clunkers program is a great incentive for you to trade-in your old car and receive a cash voucher worth up to $4,500. The voucher is then issued for your clunker, which is then used towards a newer car with better fuel efficiency. This program is only available from July 1, 2009 until November 1, 2009.

The purpose of the program is to remove as many vehicles from the road that cause higher pollutants and carbon emissions. The United States government issues the cash voucher for used clunkers made after 1984 and must get at least 18 miles per gallon or less. Cars or trucks made before 1984 are not eligible to participate in the program.

If you are thinking of participating in the Cash For Clunkers program, you should first decide if your trade-in is valued more than $3,500 or $4,500. In most cases, it will be worth less. To qualify for $4,500, the new vehicle must be an improvement of 10 miles per gallon than your trade-in. Owners must present proof that they’ve registered and insured the trade-in for at least one year.

Receive Up To $4,500 Voucher Credit From The Program

For example, if your trade-in gets 18 mpg and the new car has a rating of 28 mpg, your cash voucher will be worth $4,500. If the newer vehicle gets 4 more miles per gallon than your old clunker, you will get a $3,500 voucher. For light trucks, a 5 mpg gain nets a $4,500 incentive, while a 2 mpg gain is worth $3,500.

Trucks qualify based on class and vehicle weight. The Ford F-150 would be considered a light-duty truck and does qualify for the Cash For Clunkers program. Trucks are divided into small and light categories with slightly different requirements, but the same 25-year-old or newer condition remains.

New Hybrid Cars

There are several new cars on the market by Ford Motor Company, Toyota, and Honda. These automakers provide the most recent fuel efficient cars and trucks. Some of the models include the 2010 Ford Fusion Hybrid, 2010 Toyota Prius, and the 2010 Honda Insight.

What Happens To Your Cash For Clunkers Trade-in?

Your old clunker will be crushed and not resold. Most of the metals and other materials will be recycled. Dealers pay a transaction fee per-voucher to ensure that the engine and transmission are crushed or shredded.

The program is expected to generate or maintain hundreds of thousands of jobs across the entire automotive supply chain. This measure could spur the sales of up to 1 million more fuel efficient cars and trucks, creating jobs and shoring up car dealerships, and save over 250 million gallons of gas. Again, November 1, 2009 is the deadline for the Cash For Clunkers program.