Cashing in on Clunkers

Before the ink had dried on my draft for this article, the Obama administration suddenly pulled the plug on the government’s scheme to dole out up to $4,500 for trade-ins.

The problem, it seems, was that the federal program was too successful, churning through the $1 billion in less than a week instead of the estimated four months.

Then, before the ink dried on my second draft, Congress not only reinstated the program, but our thoughtful legislators upped the ante by another $2 billion.

We’re spending all this hard-earned tax money to jump-start the auto industry with a program that will end up having the same net effect as what GM’s “Keep America Rolling” campaign had after September 11, 2001. That was before we decided that only the government could solve problems in the free market. Back then, good old advertising and 0 percent interest revived the automobile industry, not only for GM but for every automaker.

(By the way, the “cash for clunkers” legislation is contained in 105 pages. Consider that number, knowing that the health care bill is ten times longer.)

Ready to call your local congressperson and ask just what kind of medication they’re taking in D.C.? Hold off — you might also consider cashing in on the windfall. After all, it’s your money.

A likely trade-in candidate gets less than 18 MPG (according to the revised EPA guidelines), is less than 25-years-old at time of trade (1984 and later), moves forward under its own power, has been titled in your name for at least a year, and is insured. If you’re not sure your candidate meets all these requirements, our government has thoughtfully provided a keen website with all the tools you might need to vet your clunker.

But even if the clunker in question qualifies, you want to be sure that it’s not worth more in normal trade than according to the program’s largesse.

Suppose you’ve got a well worn 2000 Jeep Cherokee Sport with 108,000 miles on the odometer. The EPA says it gets a combined fuel economy of 17 MPG, and you’ve no reason to doubt that number. The Blue Book and NADA guides suggest it’s worth no more than $3,000, and you’ve confirmed that with your own research.

Since you need some space and utility, how about a new VW Jetta SportWagon TDI diesel? It’s EPA combined 33 MPG is nearly double your Jeep’s mileage, VW’s new and clean diesel has plenty of torque for pulling power, its $25,670 MSRP is quite reasonable, and there may be room for negotiation.

On the other hand, if you own a 1984 Lamborghini Countach with an EPA of 11 MPG combined, it may qualify for the $4,500 of government money but have a much higher market value. Since there’s a nice ’84 Countach currently on sale for $119,888 in the Seattle area, let’s assume that even a Lambo parts car that starts and runs under its own power is worth more than Uncle Sam will part with.

The rules of the program seem to be bordering on capricious. Although the EPA had published fuel economy numbers on its official website for most vehicles going back to 1984, the agency decided to review those ratings and make them accurate to the fourth decimal point. That slight of hand resulted in 78 models that were eligible a week ago, and quite a few traded in anticipation of the program, to be reclassified as non-qualifiers. Dealers and consumers who were victims are up in arms. On the other hand, 86 models that were formerly ineligible now qualify. You can’t make this stuff up.

So if you think you possess a candidate for the program and are in a buying or leasing mode (and your taste doesn’t exceed the MSRP limit of $45,000), here’s a quick guide through the Clunker quagmire.

Check Eligibility

Click here and follow the prompts to determine if your vehicle qualifies. If you know what year, make, and model you own, it’s quick and painless to see if it qualifies using this simple website. And it should be official, since it’s the government. If your make and model do not appear in the listing for its year, you can call the Car Allowance Rebate System (CARS) hotline at 1-866-CAR-7891 (866-227-7891) and hope there’s a bureaucrat standing by to help.

Check Value

OK, you know if you own a vintage exotic import or sports car that is worth way more than the fed’s booty. But some cars clunk more in resale more than others. So check out the used marketplace using your computer as a tool. Kelly Blue Book, Edmunds, and Craigslist are good places to quickly determine value. Both Kelly and Edmunds will deliver high and low resale prices after the condition and mileage reading has been entered. But remember that in many cases the lower number is closer to what you’ll get in trade or private sale.

Select the New Vehicle

If you’re after the maximum $4,500 in credit, you’ll want to choose a vehicle that gets at least 10 MPG better than your “clunker.” If your choice delivers a 4-to-9 MPG improvement, the credit drops to $3,500. Not chicken feed, but you’ll have to recheck your trade-in value for that loss of $1,000.

That rule may or may not get you into a vehicle you either want or need, so use common sense when making a selection. Edmunds provides a straightforward list of new candidates and some are surprisingly fun. Like the new 2010 Camaro with its 3.6-liter, 300-horsepower direct-injection engine and sport-shifting, six-speed automatic transmission. The powerful Camaro delivers a combined rating of 22 MPG, a bit higher than smaller sports cars like Nissan’s 370Z, which just misses the cut at 21 MPG.

Make a Deal

Remember, it’s all of us that are footing the bill for your government credit, so shop as if the trade doesn’t count. Edmunds and Kelly Blue Book offer retail new car prices along with dealer cost figures. Both sites also offer average transaction prices in your area and some manufacturers have sweetened the pot with special financing or cash back offers. Chrysler has offered to match the eligible government credit, so your $4,500 could turn into $9,000 if a Chrysler, Dodge, or Jeep is of interest.

And finally, if none of this clunker business makes sense and you want a great deal on a new luxury or slightly used car, there are some amazing deals available. Then you can buy that foreclosed house with an $8,000 new buyers credit and park your new government-subsidized car.