Dealerships Give 'Cash For Clunkers' A Jump-Start

Congress has allocated $1 billion for a program to encourage people to trade in older, gas-guzzling cars and trucks for new, more efficient ones.

Officially it's known as the Car Allowance Rebate System (CARS). But most people refer to the program as "cash for clunkers."

It's designed to help struggling auto manufacturers sell more cars. A secondary goal is to improve the environment by removing from American roads vehicles that get less than 18 miles per gallon.

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The more efficient the new car is, the more money you can get from the government program. For example, if a new car gets 4 mpg higher than that "clunker" being traded for it, you qualify for a $3,500 voucher; 10 mpg and the government will pay you $4,500.

A dealer will take your old car and send it to a wrecking yard, where it will be destroyed. That means if your car is worth more than $4,500, this isn't a good deal for you.

Wrecking yards are gearing up for the extra business. In a Denver suburb, Alice Corns has been calling auto dealers to let them know she can take "clunkers" off their hands. Corns is president of Colorado Auto & Parts. She's disappointed the law restricts her from selling engines and drivetrains from the old cars.

"For a lot of recyclers, selling a good running engine is ... where their money comes from, so that puts a bit of hurt on the industry," Corns says.

The U.S. Department of Transportation was set to release rules governing the program Friday, but dealerships have already been using it as a tool to sell cars.

"We've actually been doing some cash for clunker deals already," says Fred Emich IV, general manager of Emich Volkswagen in Denver. Emich says customers came in asking about the program, and he didn't want to risk losing sales to other dealerships.

Emich was surprised to learn that most of the customers were middle-class folks with good credit ratings — usually thrifty people who kept their cars for a long time.

"I was expecting low-income, poor credit," says Emich. "It has been the complete opposite." He says a few of the customers paid cash for their new cars.

The law includes provisions to make sure someone doesn't go out and buy an old car just to take advantage of the program. Customers must have owned the car for at least a year and kept it insured.

The program runs through Nov. 1 or until the $1 billion appropriated for it runs out.

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