The Savvy Shopper: Cash for Clunkers -- Is it for You?
My 2000 Mitsubishi Galant has a trade-in value of $2,437 but it isn't technically a "Clunker."
Many folk have been asking about Cash for Clunkers, how it will apply to their specific situation and details of how the program will work. I have a clunker. It's a 2000 Mitsubishi Galant. I'd love to turn it in for a $4,500 voucher but I can't. The mileage is too high -- 21 mpg combined. Not only that, but I'm not looking to get into a car payment right now.
So I'll pass on Cash for Clunkers.
But based on the email we're getting about this bill that was passed last Thursday, a lot of you are sharpening your pencils and staying up late at night looking for loopholes in this government program.
"Hey, what if I trade in TWO clunkers? Can I get $9,000?" Or, "Can I tow in a rusting piece of junk and get my voucher?" And even, "Can I put an ad in the paper, find someone with a clunker, trade it in and buy a car for me? Then I'll give the guy $500."
Calm down everyone. You're making this WAY too complicated. Here's how to think this through.
First of all, does your car qualify as a clunker? Take a look at this list of clunkers we created. What does this tell you?
If your car is on this list it means it is worth less than $4,500 and it has the necessary fuel economy to cash it in. That's because, what "C4C" (as it's sometimes called) does is inflate the value of old clunkers in order to stimulate people into buying a new car. A polluting gas hog is crushed and a new car is sold, goosing up the economy.
What if your clunker it isn't on the list?
Well, say you find your car has the necessary mileage requirement (18 mpg or less) but our TMV shows it is worth more than $4,500. You still might want to consider using this opportunity to turn it into cash. That's because, while your trade in value might show as being over $4,500, you still could have trouble actually getting that much from a dealer. But with the Cash for Clunker bill in play, you are guaranteed $4,500 with no hassle, no negotiating. It's a done deal.
Another thing people don't seem to realize is that $4,500 is what is already on many of cars and trucks for sale in the form of incentives and rebates. So now along comes the government with the promise of a voucher for your old car. How is this so different from the customer cash back rebates or low interest financing already in play?
But let's end on an upbeat note about the C4C bill. For a few people around the country, this could be a windfall. Say you are the proud owner of a 1991 Buick Roadmaster. It currently has a trade-in value of $337 and has a combined fuel economy rating of 17 mpg. Suddenly, the old beater is worth a cool $4,500.
Now suppose that since 1991 you have changed your philosophy regarding the wanton consumption of fossil fuels and you decide to buy a 2009 Kia Rio with a combined fuel economy of 30 mpg. If you get it at the TMV price of $11,407 it has a $500 rebate on it. Then knock off the $4,500 and you are stepping into a new car for only $6,407. Plus, it's a real image makeover for you -- Buick Roadmaster to Kia Rio. I'm sure there are far greater price swings out there too.
So think this thing through before you get too overheated about the Cash for Clunkers law. And remember to make sure that this is a good time for you to buy a new car. As some sage once said, don't buy the deal, buy the car.
- Posted by
- Philip Reed June 22, 2009, 1:15 AM
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"How is this so different from the customer cash back rebates or low interest financing already in play? "
Because, it's in addition to it.
How long are these incentives in place?
As much as I hate this bill, as long as my tax dollars are going to it, we might take advantage of it. We've a 12 year old SUV (AWD, V8, etc) that we wouldn't mind replacing with something smaller and newer. An additional $4500 is tempting. My only problem is that this a perfectly good vehicle. The idea of crushing it disturbs me.
Oh yea, one last question. Are these mpg requirements the new EPA ones, the old EPA ones, or those silly ones that no one really understands?
Is a minivan considered a passenger car, or a light-utility-truck/SUV?
Yes, the $4,500 is in addition to incentives and that's nice. But there are also some incentives that are for as much as $8,000. The idea I was trying to get across is that this is not unprecedented and it takes many parts to a good car deal. For example, as you point out, your trade-in will be crushed even though it offers utility for you or someone you could sell it to.
The Cash for Clunkers program will run through October. Incentives from the manufacturer usually run from month to month. The EPA ratings are the combine adjusted ratings which are posted on www.fueleconomy.gov.
Your minivan will probably be considered a light truck or "Category 1 truck" if it weighs less than 8,500 lbs. and has a wheelbase less than 124 inches.
Phillip, I did get your point and I generally agree with it. I know that's unexpected for me. :)
"Plus, it's a real image makeover for you -- Buick Roadmaster to Kia Rio. I'm sure there are far greater price swings out there too."
Er, but is it a positive makeover? I think I'd happily keep the Roadmaster over the Kia, especially if it's the one with the 350.
I'd like to own a new car, but my 1991-92 Buick LeSabre the car is one owner, garaged kept since the day I took it home, but it doesn't qualify the mileage is to high, and I can't see having payments right now. Besides, I think this cash for clunkers program is a sham, as soon as this came out the car dealers latched on to it, because this is a way for them to make more money than they could before. If you had a car that qualifies, when you went in to make a deal for a new car the dealer could inflate the price of the new car with dealer fee's etc., and the Gov. check for the old one goes right to the dealer, doesn't it? How is that a good deal for the consumer?