Car Allowance Rebate System (CARS) is the official name of what has come to be known as the “Cash for Clunkers” program. The program was funded by the federal government. Its objective was to boost auto sales and benefit the environment. This successful program went from July 2009 through August 2009. Here is how it worked.

The owner of a gas-guzzling “clunker” could, if said clunker met certain criteria, trade it in for a newer, more fuel-efficient car. The car owner received a cash credit to put toward the new car. Of course, participating car dealerships would take quite an economic loss if they simply traded new cars for old ones. Thus, the government reimbursed the dealerships with money from the economic stimulus. To qualify, an old car and the owner had to meet the following criteria:

  • Have gas mileage of 18 miles to the gallon or less (there are exceptions to this for large trucks and other large vehicles)
  • Be less than 25 years old
  • In a condition that is drivable
  • Proof of insurance that covers the entire year
  • Proof of registration that covers at least the last full year
  • The owner must have a clear title (no liens and/or encumbrances), and have owned the car for at least a year
  • Car owners must be first-time participants

Participating car dealers had criteria to follow, too, such as the following:

  • The new car should have a retail price of $45,000 or less
  • The new car should get at least 22 miles per gallon
  • The dealer must agree to scrap or shred the old car, and disclose the scrap value. This value was then applied to the rebate or credit

There was a limit to the amount of credit that could be received for a “clunker” – between $3,500 and $4,500. The amount was determined by the Environmental Protection Agency’s (EPA’s) fuel economy rating. Large work trucks had different criteria, because the EPA does not have a fuel rating for these vehicles. For work trucks, the age and type of truck determined the amount of credit.

According to cars.gov, the CARS program was very successful. Almost 680,000 “clunkers” were scrapped in exchange for newer vehicles with better gas mileage. Dealerships were able to halt the massive job losses they were experiencing. Also, car manufacturers benefitted on every level, from parts manufacturers to assembly line employees. Jobs were saved, and new jobs were created to meet the demand for more fuel-efficient cars.

For more information and updates, check the CARS website, cars.gov.