The Cash for Clunkers program has passed the Senate and now the bill will go to President Obama to sign it into law. The Transportation Department will then reportedly have one month to figure out how the Cash for Clunkers program will be run. Since Congress reduced funding for the program from $4 billion to just $1 billion, it's expected that the money will run out long before the program is scheduled to end on November 1.
The program's eligibility rules are stiff. Trade-in vehicles must be in drivable condition, insured by the same owner for the last year, manufactured in 1984 or later and have a combined EPA fuel economy rating of 18 mpg or less. The “insured by the same owner for the last year” rule means that buyers who bought a “clunker” in anticipation of this legislation are out of luck. The good news is that because many wholesalers bought “clunkers” to resell to people looking to take advantage of this program, who will not be able to do so, now is the perfect time to buy that “classic” car for your 16-year-old.
There’s never been a better time to get you’re car stuck on top of a light pole! With the deep discounts available on Chrysler and GM products, combined with the government’s new programs discussed below, this summer may be the perfect time to buy.
Cash-for-Clunkers
The House and Senate came to terms late last night on a $1 billion 'cash for clunkers' initiative. Part of a larger $106 billion wartime spending bill, the program is not yet law, as the finalized bill must be passed by Congress (it is expected to be voted on next week) and signed into law by President Obama.
Under the terms of the compromise, vouchers worth up to $4,500 would be distributed to those who turn in old vehicles. The program's $1B backing figures to be well short of the $4B it is estimated to cost, meaning that the funding is expected to run out after September 30, the end of the fiscal year.
The House approved the measure earlier this week, but there were reports of some significant troubles in the Senate where funding and mileage requirements were concerned. In the end, the same mileage figures were reportedly agreed upon, meaning vehicles that return 18 mpg or less in combined city/highway are eligible to turn in their vehicle for a cash voucher. If the new car replacement achieves at least 4 mpg better, a $3,500 voucher would be awarded, and if the new car achieved at least 10 mpg more, the credit would be $4,500. Trucks figure to be a bit different, however, with replacement vehicles needing to net at least 18 mpg, with figures at least 2 mpg better than the soon-to-be-scrapped turn-in. In order to receive the full $4,500 voucher, however, truck buyers' new vehicle would have to improve their fuel economy figures by at least 5 mpg.
Tax Incentive
While we wait for the Cash-for-Clunkers bill to come out on the other side of Congress, there's already incentives available from the government that you can take advantage of when purchasing a new car. The main one is deducting the fees and taxes paid on a new car in next year's tax returns. Previously this tax deduction was available only in states that used a sales tax, but the U.S. Treasury announced this week that it would be extended to states without a sales tax like Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.
Since buyers in those states won't pay sales tax, they'll be able to deduct "other fees or taxes imposed by the state or local government that are based on the vehicle's sales price or as a per unit fee." That amount may not equal what buyers in other states can deduct, but at least it's something and they already don't have to pay sales tax on a new car.