Cash for Clunkers Bill

Have you been hearing all the buzz about the Cash for Clunkers or Car Allowance Rebate System (CARS)?

“How would you like to trade in your old gas-guzzling clunker and get $3,500, or even $4,500 cash to buy a new one?”

Well, the cash for clunkers stimulus program does just that. Although, the jury is out on whether the program will actually help individuals, the auto-industry, or the environment. One thing is for certain, your tax dollars (approx. $1 Billion) are involved, so it’s a good idea to know the details.

Cash for Clunker Bill (now Car Allowance Rebate System)

The cash for clunkers legislation was signed into law by President Obama on June 25th, officially as the Car Allowance Rebate System (CARS) to be administered by the National Highway Traffic Safety Administration of the U.S. Dept. of Transportation. Here’s a pdf of the C.A.R.S. Law.

Cash for Clunkers / CARS Details

Essentially, you trade in your less fuel efficient vehicle and get a credit towards a new, more fuel efficient vehicle. Key points to note:

  • Rebates range from $3,500 to $4,500, depending on the type of vehicle you trade in.
  • The vehicle you are trading in must be less than 25 years old on the date of trade in.
  • It has to be a new vehicle you are buying or leasing.
  • Both vehicles can be either domestic or foreign.
  • Your trade-in (clunker) must get 18 or less MPG (with the exception of some vehicles)
  • You must have owned, registered, and insured your trade-in (clunker) for more than a year.
  • The dealer you buy the new car from will handle all of the details.
  • The Cash for Clunkers program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
  • Your trade-in (clunker) will be destroyed. So, the dealer will only give you scrap value for it, above and beyond the CARS credit.

How to Apply for the Cash for Clunkers / CARS Program

The website makes it fairly easy to understand how the Cash for Clunkers / CARS program actually works. They detail the process in the chart:

Cash for Clunkers Rebate Process

  1. You’ll first need to visit for information on the program. I guess this is here so they don’t have any unqualified folks applying to the program.
  2. Your next step is to find your car.
  3. Once you have your new car picked out, bring the paperwork showing you’ve had the clunker (to be traded in) for at least one year. This includes the title, registration, and insurance.
  4. The dealer will then handle the submission of the paperwork to NHTSA.
  5. NHTSA will then review your paperwork and ensure the purchase meets the Cash for Clunker program requirements.
  6. Lastly, 10 days after you turn in your paperwork, the NHTSA will issue a credit to the dealer. This being the case, the dealer will likely sell you the new car and make the trade prior to getting full approval, giving you the credit before they receive it.

Who to Contact for More Info

If you’d like to know more about the program, be sure and visit the website at, or call the hotline at (866)-CAR-7891.

More Information

Get 31 Tips to Improve Your Financial Life

Subscribe for free. Get my book (31 Days to Improve Your Financial Life), intro series, and monthly digest.

Powered by ConvertKit
Last Edited: October 24, 2012 @ 9:10 pmThe content of is for general information purposes only and does not constitute professional advice. Visitors to should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.
About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, podcaster, FinCon Founder, husband, and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or Google+. Listen to the new podcast, Masters of Money!


  1. It sounds like you would have to “finance” for the upgrade, which means I will be having nothing to do with it.

    Personally I think it is wasteful to use tax payer dollars to allow people to upgrade their cars, especially if the car they are driving is perfectly fine. I have an 85 Honda CRX and love it!

    Whatever happened to the days where people used something called “good old fashioned savings” to buy a better anything? Now the Government is involved in that doing that for people too? It’s really ridiculous.

    Nice post!

  2. Well, you have to make sure that the trade-in value of your car is less than $3500 if you want to profit from the CARS program.

  3. coolhandluke says:

    I just returned from the local Ford dealership and was told that they will be allowing people to cash in their “clunkers” on July 24th. I asked them about the details and was told to actually research online b/c they were not informed about everything yet. LOL

    I did my research and found that this is a sweet deal. There is a guy documenting this whole new clunkers deal at and he lays out all the info anyone needs for deciding if this is worth while for them. Very interesting read.

  4. @Brad – I completely agree. The govt is using our dollars to get people in more debt and keep a struggling industry afloat a little while longer.

    @Joe – I agree. From a personal level, if you are going to make the most of this, you need to have a $500 vehicle sitting around, AND have the cash to afford to buy a new vehicle, less the $3,500.

  5. How many people do you know that drives a car worth LESS than 3500, who can afford or will buy a brand new car? There is a reason they drive a car that cheap in the first place.

    PLUS, most CARS will not qualify as the new car will not meet the threshold for upgrading in MPG.. now if you have an 1985 pickup that is ragged (cause if its in good shape, its prob worth about 4k….) and you are trading in on a brand new cavalier, its a great deal…

    Otherwise, its politico grandstanding… “Look what we did for you!”

  6. @Brad – I agree. Not many people will fit the bill (pun).

    Still, where’s the $1 Billion going to go? Who will get those funds?

  7. The feds will give the money straight to the selling dealership, that gave the consumer the break. Its basically a rebate form the government just like a factory rebate.

    The sad thing is, they are GIVING the cars FREE to junk yards, who are in turn pissed because they cannot sell the drivetrain… PISSED? they get FREE inventory and they are pissed…

    The cars must be destroyed which will make it even harder for poor people who depend on buying those cars for transportation.

  8. My mother in law’s car is a total clunker. It’s registered in my brother in law’s name and insured in her name. Does anyone know if we could still qualify for the program? The program says you need to show proof of insurance and title for the past year…which we have, but they’re not all in one person’s name. I’m upset because I don’t think we’ll qualify for this.

  9. @Beckie – I think it might be eligible. The CARS faq state, “be continuously insured and registered to the same owner for the full year preceding the trade-in”. As long as it’s been insured by someone for a year you’re ok. The one owner thing applies to the registration.

  10. Patsy Rivera says:

    Hello PT,

    Your recent coverage of Cash for Clunkers legislation was spot on. I thought you might be interested in more info on vehicle donation alternatives to Cash for Clunkers for the many people who don’t qualify for that government payout. You could help charities a lot by adding a link to our informational page on Cash for Clunkers versus charitable car donation –

    So many charities benefit from the donated vehicles. If you place a link to our site, please let us know. Thanks.

  11. Ben Watson says:

    My questions are

    Can I turn in a clunker truck toward a passenger car?

    How do I get the best deal if the dealer knows I have an extra 4500 bucks to work with?

    Nothing on makes the truck to car issue clear.

  12. I am a car salesman and our dealership has about 45 pending deals on this, pretty amazing how all of these people have come out of the woodwork to find a new car.

  13. PT:

    Youradvice to Becky was not correct. I sell cars, and have been doing Clunker Deals since the first week of this month. The vehicle being traded in MUST have been continuously insured and registered in the name of the person trading in the vehicle. The Feds are very specific about that.

  14. Mike:

    Your comment and the language in the Title XIII-Consumer Assistance to Recycle and Save law differ, so I am confused…

    The ruling posted on the government website specifically states “The Act’s one year insurance requirement is satisfied so long as the trade-in vehicle is insured, irrespective of the identity of the person holding the insurance policy.”

    I have scanned the 100 something page document of rules and procedures and couldn’t find anything the states the car is required to be insured by the owner for the preceeding year…while registration does have that requirement.