Blog Post

Cash for Clunkers: What You Need to Know

Tucked into a military spending bill that just passed Congress and is now heading to President Barack Obama for signature is a piece of legislation meant to help get gas guzzlers off U.S. roads and replace them with new, more efficient vehicles. Called the Consumer Assistance Recycle and Save Act of 2009, or more commonly, “Cash for Clunkers,” the $1 billion program will provide a voucher of up to $4,500 (effectively just knocking that much off the price tag — dealers will get electronic payments from the feds) to help offset the cost of new car purchases or leases over the next five months.


The version that passed Congress today represents a marginal win for makers and backers of more fuel-efficient cars. It beat out a competing cash-for-clunkers proposal that wouldn’t have taken fuel efficiency into account at all in the criteria for trade-in vouchers, but the version that passed today still has only modest MPG requirements. The government will in theory offer up to $3,500, for example, to a driver who trades in (at a participating dealer) a 16 MPG Hummer for a brand new SUV that gets a dismal 18 MPG.

As Business Insider points out today, there’s also the problem that if a car is worth more than the voucher for which it qualifies, the driver would be better off just taking the regular trade-in value. Vouchers don’t come as an addition to trade-in values because cars brought in under the cash-for-clunkers program have to be scrapped, so their trade-in value is essentially zero.

This raises questions about how effective the program will really be at taking the most polluting, inefficient vehicles out of the U.S. fleet, according to Business Insider’s Jay Yarrow:

We find it to be a stretch to believe that anyone driving around in a car that’s worth less than $4,500 can suddenly–in the middle of Great Recession–afford a new car. There’s a reason they’re driving around in a clunker, and no $4,500 discount is really going to do much to change that.

While the program is supposed to run July 1 through November 1, The U.S. Department of Transportation has 30 days to set regulations for the program — including how dealers should crush, shred or otherwise dispose of traded-in clunkers — after it gets Obama’s signature. Legislators, however, have laid out the basic framework. Here’s how it works:

Clunkers, Defined: You can only trade in drivable vehicles made in the last 25 years that have been continuously insured by the same owner for at least one year leading up to the trade in (so no junkyard finds or used cars bought to “flip”). Qualifying “clunkers” will have a fuel economy rating of no more than 18 MPG (combined city and highway ratings, which you can find on

How Much Cash?: New cars qualify only if they have a sticker price of $45,000 or less. So no Tesla Roadsters  ($109,000), but a Toyota Prius ($22,000) could qualify, depending on your trade-in. And once the $1 billion appropriated for the program runs out (good for an estimated 250,000 vouchers), it’s over unless Congress extends the program.

clunkers-vouchersPassenger Cars: New passenger cars will qualify under the program only if they have a fuel economy of at least 22 MPG. If the new model gets four more miles to the gallon than the old car, you qualify for the $3,500 credit. With a 10 MPG improvement or more, you can qualify for a $4,500 credit.

Trucks and SUVs: For light trucks, SUVs and minivans, the new vehicle has to get at least 18 MPG and can offer as little as a 2 MPG improvement over the old one to qualify for $3,500. With a minimum 5 MPG improvement, you can qualify for $4,500.

Graphics courtesy Toyota and

19 Responses to “Cash for Clunkers: What You Need to Know”

  1. wish they’d consider the effective MPG or the current value rather than listed, cuz my 1995 accord is not getting 24 MPG anymore… Hate to get screwed by doing the right thing to begin with.

  2. Josie Garthwaite

    @Mike Massa – Do you think there should be an upper limit for qualifying MPGs? It seems to me that since there isn’t an infinite supply of cash, the top priority should be getting the worst, dirtiest clunkers off the road.

    @Cash for Clunkers Ford Dealer – I agree that there has to be a limit somewhere.

  3. “As Business Insider points out today, there’s also the problem that if a car is worth more than the voucher for which it qualifies, the driver would be better off just taking the regular trade-in value.”
    I’ve never really thought about that… In reading some other blogs regarding Cash for Clunkers, people seem to be really upset about the fact that the program does not apply to used cars. The program cannot satisfy everyone and if it applied to used and new cars, how much money would the government then be giving out?

  4. Mike Massa

    This legislation needs amended to include folks who are willing to trade their cars that average MORE than the 18MPG for cars that get at least 5 MPG More….no matter WHAT they are driving. I would gladly take the deal but my car gets about 22 MPG average already (according to the NEW MPG ratings). I’d like a PRIUS….but they are way too expensive. That would about DOUBLE my gas mileage. In essence, this law penalizes those of us who were frugal in their car purchase in the first place, by buying cars that got decent mileage in the first place…but now cannot use the plan since the requirement is UNDER 18 MPG average! I have 175,000 miles on my 2001 car….but looks like it will be on the road a while longer.

  5. fred armstrong

    what about senior who are retired and have these old clunker, and live on a fixed income. can we apply.? if we can afford the monthly payment.

  6. Calvin cunningham

    Where do you go and pick up ur vehicle? do you go to ant dealership? What if your transmission wont allow you to make it there, do you still get the car? Can you get a tow and thenget ur car there?

  7. I disagree with your comments. the m.s.r.p. of a new vehicle is set for every vehicle in the country. How would you propose the prices go up? Are you saying the public is stupid enough to pay over sticker price for a vehicle, or that demand for cars will be so great that people will bid $3500 over sticker just to get a new car? Maybe your just on here trying to push some foolish website to make money your post should be pulled.

  8. Texas has had this program for several years and it is
    a big flop according to an employee I asked. They were offering 1,000.00 per vehicle and had to boost it to 3,000.00 to 3,500.00.
    The vehicles have to be 2 years old or less for trucks and 3 years for cars.
    I was exactly as quoted in the article, if I could afford
    their parameters I wouldn[[‘t have been driving a junker in the first place.
    This is yet another tax payer based government program that is not viable.

  9. jordan

    I don’t qualify because my car already gets good gas mileage. My dad swears by the car buying process here: It is kind of similar.

    I haven’t tried it yet, but I might because it looks good.

    I have a feeling dealers are going to automatically increase prices because of the increased demand (artificial) for lower MPG cars. So the thousands of savings from this bill for consumers is not entirely accurate. The demand will increase prices and you’ll get a voucher from increased prices. I’m certain some markets you’ll come out even as if they never offered this voucher. It is poorly written legislation.