If you’re in the market for a new car or truck to replace your old gas-guzzling clunker, you might be able to get a $3,500 or $4,500 rebate from the federal government. There’s no need to register or present a coupon or voucher. Just tell a participating new car dealer that you want to use the CAR Allowance Rebate System (CARS) or Cash for Clunkers program.
The CARS program proved to be so popular when it was introduced in July that the government added more funds in August to keep the rebates going. Officials said the program might have enough funds to continue through Labor Day weekend, but car buyers still should act quickly so they won’t be shut out if the program runs dry.
Here’s a summary of how the CARS program works:
Basically, the CARS program allows you to receive a rebate when you trade in an old car or truck for a more fuel-efficient vehicle. To qualify for the CARS rebate, you must meet the following qualifications:
- Be the registered owner of your trade-in car or truck and have clean title to it
- Have owned the vehicle for at least a year
- Have had insurance continuously for at least that long. (If you live in New Hampshire or Wisconsin, you’ll be exempt from the insurance requirement since those states don’t require drivers to have insurance.)
Your trade-in car or truck must be less than 25 years old on the trade-in date. The month and year of manufacture is usually posted on the inside edge of the driver’s side door.
The new car or truck that you buy may be leased, financed or purchased for cash. It must be brand-new (i.e., not used) and the manufacturer’s suggested retail price must be less than $45,000 in order to qualify for the CARS rebate.
Your CARS rebate
The amount of your rebate will depend on the improvement in gas mileage between your trade-in car and new car. For example, if the combined fuel economy of your new car is at least 4, but less than 10 miles per gallon higher than that of your trade-in car, your rebate will be $3,500. If the combined fuel economy of your new car is at least 10 miles per gallon higher than that of your trade-in car, your rebate will be $4,500. The fuel-efficiency rules are more complicated if you want to buy a new van, pickup truck or SUV, but your rebate could still be either $3,500 or $4,500.
The rebate is limited to one per person, so if you and your spouse own two trade-in cars that both qualify and both your names are on the title for both cars, you can each claim one rebate.
The rebate isn’t subject to federal income tax, but you may have to pay state or local income tax, depending on where you live.