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Cash for Clunkers Finally Passes,
Not as Good as First Hoped

June 25, 2009

Cash for ClunkersThe "cash for clunkers" bill has finally passed which means new car buyers can get vouchers of up to $4,500 when buying a new car. Here's how it works:

In order to qualify, you first need to have an older vehicle that gets a combined fuel economy rating of 18 mpg or less.

To see if your car qualifies, check FuelEconomy.gov.

Next, you need to buy a new car that gets at least 22 mpg. If you buy a pickup truck, or work truck, the MPG requirement is much lower. That's basically a quick overview. The chart below shows exactly what qualifies for what:

Passenger Car Light Duty Truck Large Truck Work Truck
Minimum MPG for New Car (combined) 22 mpg 18 mpg 15 mpg Work Truck Only
$3,500 Voucher 4 mpg Improvement 2 mpg Improvement 1 mpg Improvement or trade-in of a Work Truck. Trade-in must be 2001 or Older
$4,500 Voucher 10 mpg Improvement 5 mpg Improvement 2 mpg Improvement

If you do get a voucher, your old car will be taken off public roads and sent to the scrap yard. You will not get any money for the trade-in - just the voucher. So if your older car is worth more than $4,500, this program is not for you. And that's where the criticism of this bill comes from.

Generally, people who drive a much older car worth less than $4,500 are not going to be trading up to a brand new car. To make this program really worthwhile, you'll need to trade in an old junk car worth less than $2,500. Most analysts feel this bill will not make a huge difference in new car sales and we feel the same way. However, if you really do have an old junky car and you've been thinking of buying new, than this is a great program for you.

The bill is supposed to take effect July 1, 2009 but it may be postponed for up to 30 days.

See the lowest prices on a vehicle in your area (plus see the actual incentives you qualify for)
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My Recommendation for Car Shoppers

TrueCar No-Haggle, Edmunds Price Promise, and 1-800 Car Show are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.

California Residents - Important:

There is a new online car buying service called Roadster, available only to California residents, which I highly recommend you try - especially if you hate the stress of haggling with a car salesman. They provide an expert concierge who negotiates the price of the car and delivers it to your home with zero hassle - you never have to interact with a dealership. Here is my in-depth review of Roadster and why I recommend it.

- Gregg Fidan

Gregg Fidan

About: Gregg Fidan


Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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