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Obama signs 'clunkers' bill; $3,500 or $4,500 for eligible trade-ins July 1-Nov. 1

November 15, 2010

President Obama on June 24 signed into law legislation that includes the so-called "cash-for-clunkers" program, which provides up to $4,500 for consumers who trade-in older vehicles for a new fuel-efficient vehicle.

The Consumer Assistance to Recycle and Save (CARS) Act of 2009 is for eligible trade-ins for new vehicles purchased or leased until Nov. 1 or until the $1 billion appropriated for the program is exhausted.

But the U.S. Transportation Department has until late July to iron out several details in the act, and the Illinois Revenue Department has not ruled whether sales tax would be due on the $3,500 or $4,500 vouchers. Dealers are cautioned that any "clunkers" transactions completed before the DOT publishes the program’s rules may not qualify for reimbursement.

The CATA will relay the evolving news as it develops over the next several weeks. When enough information is available, the National Automobile Dealers Association will conduct a series of Webinars to educate dealers on how the program works and how to comply with its rules.

The National Highway Traffic Safety Administration created an official, government-run Web site,, with full details about the CARS program. Dealers should avoid other unauthorized sites that reportedly have surfaced, trying to obtain dealership information to register them for the program.

Under the program, cars rated at 18 miles per gallon or lower in combined city and highway driving could be turned in for cash vouchers good toward the purchase or lease of a new car. New cars rated at least 4 mpg higher would earn a $3,500 voucher, while a 10 mpg improvement would earn a $4,500 voucher.

Trucks, including vans and most SUVs, are eligible, but the new vehicle must average at least 18 mpg and get at least 2 mpg more than the old vehicle to qualify for a $3,500 voucher. A $4,500 voucher goes to a new truck getting 5 mpg more.

Trade-ins must be driveable, not more than 25 model-years older than the new car, and registered and insured by the owner for at least the past 12 months.

For the clunkers, the legislation is a death sentence. Participating dealers must certify that they transfer clunkers to an entity that will crush or shred the vehicles, to keep them off the streets.

Dealers must register to participate in the program. The procedure to register is not finalized.

"Because a customer’s decision to purchase usually comes down to the monthly payment," said NADA Chairman John McEleney, "a $3,500 credit translates to $75 to $100 a month in savings, which is very significant."