Cash for Clunkers
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Step 1: Qualifications - As written, the current Cash for Clunkers program applies to vehicles that have been registered and used by the current owner for the past year, and those same vehicles must have been built after 1984 and get less than 18 mpg in combined highway and city driving.
The United States Environmental Protection Agency (EPA) operates a Fuel Economy website that lists mileage standards for all such vehicles.
Using the website is easy. Click on the year, make and model of your vehicle (including the engine size) to see your vehicle's fuel efficiency rating.
Step 2: Determine Your Vehicle Value - While car owners who love their cars consider them priceless, car dealerships do not share that thinking. They see a used car as another way to earn a profit.
Traditionally, car dealers use the Kelly Blue Book as a tool for valuing a used car. Selling your used car yourself often brings a higher price, albeit with the added cost of time and effort required to sell it.
Individuals not willing to invest the time and effort can preform a search on the year, make and model of their vehicle on the Kelly Blue Book site to get a ball park estimate of its trade-in value. The trade-in value of the vehicle should be less than any potential Cash for Clunkers grant in order to make the deal financially sound.
Step 3: Choose A New Car: Choosing a new vehicle is always an individual decision. The following examples show a decision process that maximizes the price and environmental benefits of a new vehicle choice.
In order to qualify for the $4,500 maximum grant, your new vehicle needs to be at least 10 mpg (combined city and highway) more efficient than your trade-in. So, for example, if your old vehicle is rated at a combined 17 mpg, your new vehicle needs to have a minimum 27 mpg combined fuel efficiency rating.
Any new car that gets between 4-9 mpg more than your old vehicle qualifies for a $3,500 grant. Truck standards differ slightly.
Many of the subcompact and compact cars on the market today achieve 27 mpg or greater mileage standards. A quick look at local car dealership offerings show, for example, the Chevrolet Cobalt and the Toyota Yaris (among others) on sale in the $10,000 to $12,000 range.
Taking into account the $4,500 Cash for Clunkers grant, your new car could cost in the range of $5,500 to $7,500. It's not quite as good as getting a free car from Oprah, but taking into account that President Obama and the U.S. Congress lack Oprah's power, it's still a great financial deal.
Additionally, anyone who has not been on vacation for the past eighteen months recognizes that the world's oil powers are chomping at the bit to get their profits up to the past record levels. The subcompact and compact cars produce less pollution and will reduce your future gasoline bills substantially.
Hybrid vehicles represent another great environmental choice. While many consumers might have questioned the extra cost of a hybrid vehicle compared to its non-hybrid counterpart, the $4,500 grant effectively neutralizes most, if not all, of the added technology costs associated with a hybrid car. The state and federal tax credits available for hybrid purchases also help make hybrids more affordable.
Of course there is a less than environmentally friendly aspect to the Cash for Clunkers program that translates into little more than an automobile industry bailout. One can only hope that the good people of Detroit can use the bailout opportunity as a space for investing the same amount of passion and energy they put into their sports teams during the past ten years, into their automobile industry, and produce some real winners in the future.
© 2009. Patricia A. Michaels