Getting Cash for Clunkers

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The cash-for-clunkers rebate program is scheduled to go into effect “around July 24.” If you have an older vehicle that you’re ready to replace, you could qualify for a rebate of up to $4500 on your new car purchase. To avoid unpleasant surprises, don’t show up at the dealership until you understand how the program really works.

Rebate or market value, not both

The cash-for-clunkers rebate of up to $4500 will not be in addition to the fair market value of your old clunker—it’s more likely to be addition to the scrap value of your clunker. This is because, by law, the cars turned in as clunkers must be destroyed. Since the dealer can’t resell your old car, the dealer isn’t going to pay you fair market value for it. Dealers are required to give you an estimate of the car’s scrap value, and you can expect they’ll use that number to determine your trade-in value. You can still try to negotiate this amount, as you would negotiate the fair market value of a trade-in.

Because you give up fair market value when you take a cash-for-clunkers rebate, it may not make sense for you to participate in the program. If the fair market value of your car exceeds the qualified rebate amount, then cash-for-clunkers doesn’t help you in the least. You’re better off selling your car independently and using the cash proceeds as a down payment at the dealership.

Not all clunkers qualify for cash

You cannot throw an Edsel on a trailer and take it to the dealer for a cash-for-clunkers rebate. To be eligible, the trade-in vehicle must not be older than 25 years and it must have a city/highway fuel economy of 18 miles per gallon or less. It also must be drivable, insured and registered. You will need to document that the car has been insured for the year prior to the trade-in. Different requirements may apply to work trucks and category 3 vehicles.

If you don’t know your car’s fuel economy, search for it by make, model and engine size on

Restrictions also apply to the car you are purchasing. For example, the new car’s manufacturer’s suggested retail price cannot exceed $45,000. The new car’s fuel economy comes into play as well; the amount of the rebate is largely determined by the difference in fuel economy between the clunker and the new car.

Learning more

Once the cash-for-clunkers program goes live, you can visit to find out if your clunker qualifies for a rebate.


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