Cash For Clunkers Bill: House Passes, We Analyze

The Community Assistance to Recycle and Save Act (CARS Act), more commonly known as the Cash for Clunkers bill, passed the U.S. House of Representatives moments ago by a vote of 298-to-119. So how's it work?

The concept behind "cash for clunkers" as practiced by both the House and Senate versions of the bill, as well as successfully in other countries, is to create demand for new cars and raise fuel efficiency standards by encouraging consumers to trade in their gas guzzling "clunkers" for more efficient vehicles and, as an incentive, to give them cash.

The compromise House version of the CARS Act (HR 2751) proposes $3,500 or $4,500 vouchers for consumers interested in trading up to a more efficient vehicle. Once the program is enacted you'll have approximately one year to make the move. The hope is the Act will increase new vehicle sales by one million units in the first year at a time when the market is expected to experience sales of less than 10 million. The bill still has to go to the Senate, where it's expected some tweaks will be made before a final bill goes to the President.

How do you qualify for the voucher?

For Passenger Cars
If you have a passenger automobile not classified as a truck you qualify for a $3,500 credit if you trade in a less efficient vehicle for one with a combined fuel economy value at least 4 MPG higher that costs less than $45,000. The passenger car being trading in has to get 18 MPG or less, meaning you can't trade in a first generation Prius for a newer one. Additionally, the new vehicle has to get 22 MPG or better. In order to qualify for $4,500 you need to buy a vehicle that gets 10 MPG better combined than your trade-in.

For Light Duty Truck And SUVs
If you decide you want to trade in your category 1 light truck or SUV you need to find a new vehicle capable of getting a combined MPG of better than 18 MPG. If the new vehicle gets 2 MPG better you're eligible for $3,500. If you want the full $4,500 you need to find a new truck capable of getting a combined mileage 5 MPG higher.

For Heavy Duty Trucks And Vans
If you have a large Class 1 truck you're eligible for a $3,500 voucher if you trade up for one capable of getting at least 15 MPG combined and gets 1 MPG combined. For $4,500 the new vehicle will also have to provide performance 2 MPG or better than the trade in.

For Work Trucks
The best you can get for trading up to a Class 2 truck like a Ford F-250, is $3,500. In order to get this voucher you need to be trading in a vehicle with a model year older than 2001 for a new truck of smaller or similar size. Because of recent federal regulation changes, it's assumed the new truck is going to have a higher fuel economy.

Trading Up
After receiving questions about this from commenters, we contacted the sponsoring Congresswoman's staff and they assured us you can trade up from a truck or SUV to a passenger car (or smaller truck) assuming the new vehicles meets the minimum requirements (18 MPG or better, under $45,000) and is more efficient than the trade-in.

No Cheating
Those wishing to buy an older junked car for $200 and trade it in for $4,500 towards a new car are going to be dissapointed. The bill requires you to own and operate the car for more than a year before trading it in and it has to be in drivable condition, meaning the clunker can't be overly clunky.

No Old Cars
Many car enthusiasts fearful someone will trade in a rare classic will applaud the section limiting the cars to those produced in model year 1985 or after. Of course, this wasn't done for the sake of car fans. They can't easily determine the combined fuel economy of vehicles before the date because the EPA didn't track this data.

To The Crusher!
The law is very explicit on this point: the car has to be crushed. No salvaging it. No retitling it. No shipping it off to another country. The car has to be crushed and the title has to be transferred. Anyone trying to pass the voucher off and then resell the car could be penalized $15,000 per violation. However, you can strip and sell any part of the car that isn't the engine block.

[Library Of Congress, Detroit News]