(July 29, 2009) "Cash for Clunkers" got plenty of publicity in the early days of summer. As soon as potential car-buyers heard about $3,500 and $4,500 government rebates for buying a new vehicle, many started thinking about a purchase - even if that had previously seemed unwise, due to the financial crisis and potential economic hardships. Get rid of the old guzzler and drive home a new model, helped by a substantial discount paid for by the government? What could be wrong with that?

According to the National Highway Traffic Safety Administration (NHTSA), which administers the program, the goal is to "energize the economy, boost auto sales and put safer, cleaner and more fuel-efficient vehicles on the nation's roadways."

While the idea sounds worthy and logical, the execution of the program - coupled with what many consider a shortage of foresight during its development - has been less than ideal. Mainly, though initial details were available in the media, the federal government did not release final rules for the program until July 24. Naturally, dealers were hesitant to conclude deals based upon the prospect of such a discount, without being absolutely sure that the money would be forthcoming. As a result, some dealerlships wound up with trade-ins cluttering their lots, awaiting those final rulings.

Here's how the CARS program works

For qualifying transactions, either $3,500 or $4,500 is applied toward the purchase of a more fuel-efficient new car. To qualify for one of these discounts, the new vehicle must have a fuel-economy estimate that's higher than the old one by a specified amount. Those estimates have been compiled by the Environmental Protection Agency (EPA), for combined (city/highway) driving.

The vehicle being traded-in must be less than 25 years old and drivable, and the new one must have a Manufacturers Suggested Retail Price (MSRP) under $45,000. For purposes of this program, the base price of the new vehicle (not counting accessories) is assessed - not the actual total selling price. In general, the trade-in must have a fuel-economy estimate of 18 mpg or less (though some large pickup trucks and vans may be rated at 15 mpg or less).

Depending upon the exact models involved, the new vehicle must get an EPA estimate that's 1 to 10 miles per gallon higher than your current car or truck. To qualify, a new passenger car must have a fuel-economy estimate of at least 22 mpg. New SUVs and light trucks must have an estimate of at least 18 mpg.

If the new passenger car's mileage estimate exceeds that of the traded-in vehicle by 4 to 9 mpg, the incentive is $3,500. If the difference between the two is 10 mpg or more, the discount grows to $4,500.

If you trade a car or light truck in on a new light truck, the $3,500 figure is valid for an increase of 2 to 4 mpg. If it's 5 mpg or more, the discount escalates to $4,500. Larger trucks may have to exceed the trade-in's estimate by as little as 1 or 2 mpg to qualify.

Example: A 1998 Oldsmobile Achieva V-6 has a combined fuel-economy estimate of 21 miles per gallon. If the owner of that vehicle trades it in on a 2009 Hyundai Accent with manual shift, which gets a 29-mpg combined estimate, that transaction warrants a $3,500 discount. It's the difference between old-vehicle and new-vehicle mileage estimates (in this case, 8 mpg) that determines whether a transaction qualifies for a discount, and how much it would be.

Though the program is often referred to as "Cash for Clunkers" or "Cash for Guzzlers," those aren't the real names. The official name is the Car Allowance Rebate System (CARS). Part of a war appropriations bill, it's officially Title XIII of Bill H.R. 2346, introduced in the House of Representatives. This automotive stimulus program will expire in November 2009 - or sooner, if the $1 billion set aside for this purpose is used up before November.

Shoppers who anticipate participating in the program must bring to the dealership three items, to prove that they've owned the trade-in vehicle for at least one year:
• Proof of insurance for the past year
• Proof of registration for the past year
• A "clear" title for the vehicle (with no liens)

Dealers will supply all information to NHTSA. After about 10 days, NHTSA will issue a financial credit for either $3,500 or $4,500, payable directly to the dealer but in the customer's name. The credit is applied at the time of final purchase.

Not all dealers are participating. By the time the final rules were issued, about 1,600 dealers had signed up. Dealers face harsh penalties if they don't comply with another provision: the traded-in vehicle must be crushed or shredded at an approved installation. Dealers are obligated to see that the traded-in vehicles are properly destroyed, and cannot be sold again. Obviously, the program would be useless if the gas-guzzling trade-ins could find new owners. Before crushing, the engine must be disabled, which involves running it for several minutes with a specific chemical substituting for the usual oil in the crankcase.

For additional information, check www.cars.gov (part of the NHTSA web site). One private web site, www.CashForClunkersInformation.org, has a Cash for Clunkers Calculator, to help determine if your current vehicle is eligibe. Similar "tools" are available at the National Automobile Dealers Association (nada.org), AutoTrader (autotrader.com), autobytel.com, and Kelley Blue Book (kbb.com). Spanish-speaking shoppers can check at www.DineroPorSuCarcacha.com.

Official EPA fuel-economy estimates for both new and older vehicles may be found at www.fueleconomy.gov.

Critics of the program point out several possible flaws. For one thing, a provision that encourages purchase of domestically-made vehicles was omitted, thus "watering down" the initial intent. If a lot of people participate, the incentives add up to a substantial sum, nationwide. It's not clear how much fuel-savings will result, especially since new trucks may have to be only a little more frugal on fuel than the truck that's being traded-in.

To complicate matters further, shortly after the final rules were issued on July 24, the EPA changed the fuel-economy estimates of about a hundred older vehicles. Some that would have qualified before, suddenly did not, which certainly displeased those potential buyers. Others didn't qualify originally, but now might be acceptable because their estimates went down slightly.

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