You also must have owned and insured the old vehicle for at least one year before trading it in, says Peter Kitzmiller, president of the Maryland Automobile Dealers Association. That's to prevent people from buying a $100 used car and then trading it in to get the voucher, he says.
The aim is to get gas-guzzlers off the road, so your old car will be junked. You won't get money for the trade-in on top of the voucher. So this program is not for you if your old vehicle is worth more than the voucher.
"This will help people who bought a $1,000 car a year ago, and now have the wherewithal to buy a new one," says Bob Trinz, senior tax analyst with Thomson Reuters' Tax & Accounting.
Kitzmiller says this program along with a new sales tax deduction can add up to sizable savings. That new tax break allows you to deduct on your federal return the sales tax on a new vehicle purchased between Feb. 17 and the end of the year. It applies to the sales tax paid on the first $49,500 of a vehicle's price tag.
The voucher also won't be counted as income for tax purposes, Trinz adds.
But Jeremy Anwyl, chief executive of the automotive site Edmunds.com, advises consumers not to get too excited.
"It's not going to hurt. It's just being oversold," he says.
Anwyl advises checking out the value of your old vehicle before signing up for the cash for clunker program to see if the voucher is worthwhile. You can check the value online at the Edmunds.com site, which also lists vehicles that will likely be eligible for the clunker program.
Fitzpatrick says he plans to get cash for his clunker, unless he can find a better deal before July. He says his 1996 Buick Century has about 140,000 miles on it and isn't worth more than $500. It gets 12 to 15 miles per gallon. "I'm sure my car is not environmentally friendly," he says. "I don't know who would want to buy it."
He's looking at another mid-sized Buick or a Toyota Avalon that should qualify for the $3,500 voucher. "If I want a smaller car with better gas mileage I would get a higher voucher for that car. I'm not sure if I would like a smaller car," he says.
