Car Allowance Rebate System (CARS)

Are You Crazy? Why Would I Turn Down An Automatic
$4,500 Discount On A New Vehicle?

Because The New Federal “Cash For Clunkers” Program
Could Actually Make Your Next Car Purchase MORE Expensive!

The Federal Government has a new program offering you up to $4,500 off the purchase (or lease) of a new vehicle if you trade in your old “clunker.”

This program is designed to achieve several goals:

1. Help you purchase a new, more fuel efficient vehicle when you trade in a less fuel efficient vehicle.
2. Reduce greenhouse gas emissions
3. Help stimulate the economy and auto industry
4. Help get less fuel efficient vehicles off the road to reduce our dependency on foreign oil
5. Increase energy sustainability

Sounds great! We agree with ALL these objectives!

So…Everyone should head down to the dealership…right?

Not necessarily. Why don’t you leave the parking brake on while we look at the issue a little closer?

President Obama recently signed into law a program the National Highway Traffic Safety Administration (NHTSA) calls the Car Allowance Rebate System (CARS). You may have also heard this law referred to as the “Cash For Clunkers” Program.

While the CARS/Clunker Act makes transactions on or after July 1 potentially eligible for up to $4,500 ($3,800 for work trucks) in credits, interested consumers may want to wait until all of the issues for implementation are resolved and the final rule is issued. This is expected to occur around July 24.

There are several points to consider before signing for your new vehicle:

• Your vehicle must be less than 25 years old on the trade-in date(work trucks must be manufactured before the 2001 model year)

• Only purchase or lease of NEW vehicles qualify (work trucks must be traded in for a category 2 or 3 vehicle that is of similar size or smaller)

• Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)

• Trade-in vehicles must be registered and insured in YOUR name continuously for the full year preceding the trade-in  

• You don't need a voucher; dealers will apply a credit at purchase

• Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first

• IMPORTANT: The vehicle that you are trading in is required to be destroyed. Since the dealership cannot resell it, the value you negotiate with the dealer for your trade in is not likely to exceed its scrap value. The law requires the dealer to disclose to you an estimate of the scrap value of your trade-in vehicle. You may come out ahead by foregoing the CARS credit by doing a normal trade-in of your old vehicle. Ask the dealership to figure the transaction both ways. The “Cash For Clunkers” credit makes more financial sense when trading older cars with lower trade-in values (ideally close to the scrap value).

Although the Car Allowance Rebate System is a good idea and it will provide the best trade-in deal for many consumers, it’s not really “free money” for you to buy a car. You still need to do your homework by negotiating the best trade-in value for your “clunker” and then see if the CARS program works in your favor. Don’t assume the $4,500 will be your best option.

For more information about the CARS/”Cash For Clunker” law click here or call PRO-TAX at 1-800-809-2829.

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