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Q&A on Cash for Clunkers program

July 27, 2009

Following is information about the Cash for Clunkers program.

Q: Which vehicles qualify?

A: Cars and trucks must be 1984 models or newer to be eligible for a trade-in rebate. They must get 18 miles per gallon or less in combined highway/city rating -- based on the Estimated New EPA MPG ratings available at www.fueleconomy.gov. The vehicle needs to be drivable, insured and licensed for at least a year -- so forget about buying a clunker this summer for $500 and "flipping" it through the program. Violators face penalties if they submit false information.

Q: How do I qualify for the incentives?

A: For passenger cars, consumers can get $3,500 if the new vehicle gets at least 4 mpg more than the trade-in and $4,500 if the new vehicle gets at least 10 mpg more than the trade-in. For sport utility vehicles, pickup trucks or minivans, owners can get a $3,500 rebate if the new vehicle gets at least 2 mpg higher than the old vehicle. The rebate improves to $4,500 if the new vehicle gets at least 5 mpg higher than the trade-in. Large work trucks weighing at least 6,000 pounds can also qualify for rebates of $3,500 to $4,500.

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Q: Can I buy any kind of vehicle through the program?

A: This won't subsidize a new Ferrari. The new vehicle needs to meet the fuel-efficiency requirements and have a manufacturer's suggested retail price of less than $45,000. It can be a domestic or foreign model. Used-car purchases are not allowed under the program.

Q: Can I get the clunker rebate plus the value of my trade-in?

A: No.

Q: My old car or truck is worth more than $4,500. Should I use this program?

A: Probably not. The program essentially guarantees a minimum trade-in for a vehicle. So someone with an old beater valued at $1,000 that meets the mileage requirements stands to gain the most. Any prospective buyer with an old car worth more than $4,500 should probably trade it in for a new one. But many automakers and dealerships are offering additional incentives, so it's worth talking to your dealer.

Q: What happens to my old vehicle?

A: The trade-in vehicle will be scrapped. Dealers are required to use a government-approved salvage facility for the vehicle disposal. Vehicles need to be shredded or crushed within six months.

Q: What do I need to do to participate?

A: Go to your local car dealer. Dealer registration for the program began Friday. Owners need to bring their vehicle, title, proof of registration and proof of insurance.

Q: How will this program affect other dealer and manufacturer incentives?

A: Dealers must use the rebate in addition to -- instead of as a substitute for -- other rebates and discounts available to consumers. Many automakers are combining internal incentives with the government rebates to lure customers to showrooms. For example, Chrysler is offering $4,500 in cash toward the purchase of a new vehicle. Dealers are also required to disclose the best estimate of the salvage value of each vehicle.

Q: Does any money change hands?

A: No. If a consumer qualifies for a government rebate, the amount of the rebate is deducted from the vehicle's sticker price and the dealer is later reimbursed by the National Highway Traffic Safety Administration.

Q: How many clunkers are expected to be traded in through the program and how much will it cost the government?

A: The program will cost $1 billion to remove about 250,000 vehicles from U.S. roads. It's unclear if Congress will seek more money later this year. Some lawmakers, led by Sen. Dianne Feinstein, D-Calif., have said if Congress provides more funding, the program should require consumers to buy vehicles with higher fuel-efficiency than the current program's requirements.

Q: How long does the program last?

A: It ends Nov. 1 or when the $1 billion in funding runs out. Jack Nerad, executive market analyst for Kelley Blue Book, makes this suggestion: "I would look to see if I qualify right away. A lot of people won't qualify" because of the specific requirements. Nerad said automakers might offer additional incentives before the program ends.

-- The Associated Press

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