WASHINGTON (8/10/09)--Buyer response to the Cash for Clunkers program exceeded expectations--the appropriated $1 billion disappeared in just a few weeks--and legislators have just approved an additional $2 billion to keep the program rolling. The refueled funds are expected to last through Labor Day (Washington Post
Aug. 7). Cash for Clunkers, the government-funded Car Allowance Rebate System (CARS), began July 1, and funds were expected to last until Nov. 1. Under the program, consumers can trade in old cars for new
--not used--more fuel-efficient models and receive a $3,500 or $4,500 voucher. The value depends on the mileage improvement of the new vehicle. To participate, your trade-in must meet specific requirements. You can find the most detailed requirements at cars.gov
, the only official government site for the CARS program. July new-car sales were the highest the industry has seen since August 2008 (msnbc.com
Aug. 3). Car dealers, sitting on piles of inventory, are thrilled consumers are reacting to the program. The vouchers offer a good deal to many, but consumer advocates are encouraging potential buyers to think carefully about the costs of owning new car. Ask yourself several questions before buying:
* Can you afford the new-car payments? Because of the recession and high unemployment, some buyers may sign a contract they don’t have the money for. * Will your insurance costs change? Keep in mind that they may go up or down, depending on the new model. * Do you know whether the new car you’re considering is reliable? ConsumerReports.org has a section dedicated to the Cash for Clunkers program. Find a list on its site of “Recommended cars that qualify for a voucher”--models that meet program requirements and also score well in safety and reliability testing. * Are you dealing with a reputable CARS program dealer? Scam artists already have created bogus websites to take advantage of unsuspecting consumers. A site requesting your name, address, account details, Social Security number, or other personal information for voucher registration is likely a fraud. The CARS program requires no pre-registration and will never request information from individual consumers--all transactions go through the dealer (FTC July 28). Find registered dealers in your area using the dealer locator at cars.gov. * What is the trade-in value of your old car? If the trade-in value is more than the CARS voucher amount, take that instead. You cannot receive both the voucher and the trade-in value for your vehicle. Edmunds.com has a list of cars with values less than $4,500--check if your trade-in is on the list. * Have you done your car-buying research? You can find new car-buying advice on ConsumerReports.org and by searching other auto sites, such as Edmunds.com, kbb.com, or JDPower.com. If you decide to make a purchase, gather pricing information before hitting the dealerships. And, see the professionals at your credit union for assistance. They can help you evaluate your financial situation, pre-approve you for a car loan, and answer any questions you may have.
For more information, read “Understand Clunkers Program--Vouchers for Fuel-Friendly Cars” in Home & Family Finance Resource Center