Want to Cash in Your Clunker? Better Hurry The government could give you a tax-free credit of up to $4,500 for your old car.

By Carol Tice

Opinions expressed by Entrepreneur contributors are their own.

If you've got an older car you'd like to trade in for a new, more fuel-efficient one, now's the time. A federal program that officially kicked off July 24 will hand you a tax-free credit of up to $4,500 for your junker if you buy or lease a more fuel-efficient new car.

The credit can be used toward the downpayment or to buy down lease terms on the new vehicle. The catch: With just $1 billion in funding, new-car dealers expect the money will go fast, possibly being exhausted in as little as a month.

Here are the basics on the Car Allowance Rebate System (CARS), more commonly known as the "cash for clunkers" program. Individuals and businesses can participate in CARS, says Department of Transportation spokeswoman Ellen Martin. There is a limit of one trade-in per any registered user--so a business owner could conceivably trade in one personal car and one registered to the business.

The new car can't have a purchase price of more than $45,000. Program rules require the dealership have the clunker scrapped.

The trade-in car must be 25 years old or less, be continuously registered and insured for the past year to the owner making the trade, and have a clear, unencumbered title. In some cases, the car can't be more recent than 2001 models.

For one category, classified as "work trucks," gas mileage isn't a factor and only a $3,500 credit can be obtained. There's a chart that helps you determine the amount of your CARS credit at http://www.cars.gov/files/day-one.pdf.

CARS officially ends Nov. 1, but there's reason to believe the money will run out long before then. It's simple math--divide $1 billion by $4,500 and you get less than 223,000 trade-ins before the money's gone. Since some trade-ins may only qualify for a $3,500 rebate, the money may go a bit farther. But any way you slice it, there will only be about 5,000 trade-ins per state, on average.

The money is already being tapped, as some dealers began making CARS deals weeks ago. Hyundai dealers started accepting CARS trade-ins July 1, as Hyundai Motor Co. decided to front dealers the federal credit until federal reimbursements become available. Other dealers began lining up clunker deals early, putting a "sold" sign on the new car in the deal and waiting to sign final papers.

In the New York City suburb of Mahwah, N.J., Rick DeSilva has done both types of early CARS deals. DeSilva, 57, owns two dealerships, Liberty Hyundai and Liberty Subaru, with combined sales of around $52 million a year.

His Subaru lot has parked several "sold" new cars, while his Hyundai dealership made 15 CARS deals before July 23, with early reimbursement from the automaker. DeSilva says sales at the Hyundai lot are up 20 percent in July, and he expects a bigger increase next month as CARS catches on.

"It's created a lot of interest and stimulated people to walk in," he says. "That gives us an opportunity to sell them."

Full details on the program, including a list of participating dealers, will be posted at www.cars.gov, or call the CARS hotline at (866) CAR-7891.

Carol Tice

Owner of Make a Living Writing

Longtime Seattle business writer Carol Tice has written for Entrepreneur, Forbes, Delta Sky and many more. She writes the award-winning Make a Living Writing blog. Her new ebook for Oberlo is Crowdfunding for Entrepreneurs.

Editor's Pick

Related Topics


The Coolest Way to Commute Is Less Expensive Than Ever

Gift yourself a better commute with $1,500 off this eBike.

Business Ideas

55 Small Business Ideas to Start in 2023

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2023.


How to Start a 'Million Dollar' Morning Routine

Restructure your morning with a few simple steps that may help to amplify your energy.

Growing a Business

How an Executive Coach Can Help You Set Better Goals — And Transform Your Business

Ways to enhance your competitive advantage — and psychological wellbeing — with the assistance of a seasoned, results-focused professional.


Don't Just Babble on LinkedIn — You Need to Carve Out Your Own Niche. Here's Why.

To ultimately unlock the full potential of your LinkedIn experience, you need to establish yourself as a thought leader in a specific niche. This is why (and how).