The Car Allowance Rebate System (CARS), colloquially known as "cash for clunkers", was a $3 billion U.S. federal scrappage program intended to provide economic incentives to U.S. residents to purchase a new, more fuel-efficient vehicle when trading in a less fuel-efficient vehicle. The program was promoted as a post-recession stimulus program to boost auto sales (which had declined due to the 2008 financial crisis, the Great Recession, and the 2008–2010 automotive industry crisis) while putting more fuel-efficient vehicles on the roadways.
The program officially started on July 1, 2009, the processing of claims began July 24, and the program ended on August 24, 2009, as the appropriated funds were exhausted, having scrapped 677,081 vehicles. The deadline for dealers to submit applications was August 25. According to estimates of the Department of Transportation, the initial $1 billion appropriated for the system was exhausted by July 30, 2009, well before the anticipated end date of November 1, 2009, due to very high demand. In response, Congress approved an additional $2 billion.
Legislative history Economist Alan Blinder helped popularize the idea of a scrappage program and the moniker "cash for clunkers" with his July 2008 op-ed piece in The New York Times. Blinder argued that a cash-for-clunkers program would have a three-pronged purpose of helping the environment, stimulating the economy, and reducing economic inequality.
Jack Hidary of Smart Transportation and Bracken Hendricks of the Center for American Progress co-wrote a paper that was distributed to congressional offices in November 2008 describing the multiple benefits of a cash-for-clunkers program.
The House approved creating a cash-for-clunkers program with the 298 to 119 passage of the CARS Act ("Consumer Assistance to Recycle and Save Act", H.R. 1550). The House bill, sponsored by Rep. Betty Sutton (D-Ohio), allowed consumers to trade-in vehicles with a combined fuel economy of or less for new, more efficient vehicles. In the Senate, Debbie Stabenow (D-Michigan), and Sam Brownback (R-Kansas) sponsored a bill very similar to the House's.
An alternative bill proposed by Dianne Feinstein (D-California), Susan Collins (R-Maine), and Chuck Schumer (D-New York) would have had a greater focus on increasing fuel economy. Proponents argued that the alternative bill would lead to 32% more efficiency improvements than the House-Stabenow-Brownback version of the program. The alternative bill would have required that the trade-in vehicle have a fuel economy rating of or less and offered a three-tiered voucher system ranging from $2,500 for a new car that is more efficient than a trade-in to $4,500 for one that is more efficient. Mileage improvement requirements would be less for light and heavy-duty trucks. Pre-1999 work trucks would be eligible for the $2,500 voucher regardless of mileage improvements. The alternative bill also gave a $1,000 voucher for the purchase of a more efficient used car; the House bill completely excluded used vehicles.
In the Senate, the cash-for-clunkers legislation was inserted into a larger war supplemental funding bill. Dissenting Senators raised a point of order under Rule 28, prohibiting inserting provisions not previously passed by either house into conference reports. The rule was overridden with 60 votes, despite some senators, including Sam Brownback, being uncomfortable with a last-minute change that called for the bill's funding to come from "deficit spending" rather than from the stimulus package that was initially agreed upon. The larger funding bill passed by a vote of 91–5 in the Senate.
The Supplemental Appropriations Act, 2009 was signed into law with the Consumer Assistance to Recycle and Save Program (C.A.R.S.) as Title XIII. The program received an initial allocation of $1 billion (out of the $4 billion estimated cost) funded by the U.S. government and the program's length was July 1 – November 1. It was implemented by the National Highway Traffic Safety Administration (NHTSA), which had 30 days from the approval of the bill to post all program details online.
In response to the U.S. Department of Transportation's estimate that the $1 billion appropriated for the system was almost exhausted by July 30, 2009, due to very high demand, Congress approved an additional $2 billion for the program with the explicit support of the Obama administration. On July 31, 2009, the House of Representatives approved the extra $2 billion for the program, and the Senate approved the extension on August 6, defeating all six amendments presented. President Barack Obama signed the bill into law on August 7, and the appropriation was exhausted by August 24, 2009.
Eligibility criteria Vehicle must be less than 25 years old on the trade-in date. Only the purchase or 5-year minimum lease of new vehicles qualify. Generally, trade-in vehicles must get a weighted combined average rating of 18 or fewer miles per gallon (some very large pickup trucks and cargo vans have different requirements). Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in. Trade-in vehicles must be in driveable condition. The program requires the scrapping of the eligible trade-in vehicle and that the dealer discloses to the customer an estimate of the scrap value of the trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate. The new car bought under the plan must have a suggested retail price of no more than $45,000, and for passenger automobiles, the new vehicle must have a combined fuel economy value of at least .
Last-minute car ineligibility According to USA Today, the U.S. Environmental Protection Agency (EPA) revised its mileage estimate list just before the start of the Car Allowance Rebate System program.
For example, the 1991 Dodge Grand Caravan is listed below as ineligible because the 1991 Dodge Grand Caravan with a 4-cylinder engine has an EPA combined mileage of 19 and is not eligible; however, the V6 3.3 L and 3.8 L engines in these vehicles have EPA combined mileage of 18 and thus are eligible. The changes made some of the following cars with specific engine configurations ineligible:
Ineligible cars 1987 Alfa Romeo GTV 1987 Alfa Romeo Milano 1987 BMW 5 Series 1987 Chevrolet S10 Blazer 2WD 1987 Dodge Caravan/Grand Caravan/Ram Van 2WD 1987 Dodge Shadow 1987 Ford Aerostar Van 1987 Ford LTD Crown Victoria 1987 Ford LTD Crown Victoria Wagon 1987 GMC S15 Jimmy 2WD 1987 Lincoln Continental 1987 Lincoln Mark VII 1987 Lincoln Town Car 1987 Mercury Grand Marquis 1987 Mercury Grand Marquis Wagon 1987 Plymouth Sundance 1987 Plymouth Voyager/Grand Voyager 2WD 1987 Plymouth Voyager/Grand Voyager 2WD 1987 Porsche 944 1987 Toyota Truck 4WD 1988 Mazda 929 1988 Peugeot 505 Sedan 1988 Peugeot 505 Sedan 1988 Toyota 4Runner 4WD 1989 Mazda 929 1989 Peugeot 505 Sedan 1989 Porsche 911 Carrera 1990 Audi 80 Quattro 1990 Dodge Caravan/Grand Caravan/Ram Van 2WD 1990 Plymouth Voyager/Grand Voyager 2WD 1990 Saab 9000 1990 Toyota 1-Ton Truck 2WD 1990 Toyota Truck 2WD 1991 Audi 80 Quattro 1991 Dodge Caravan/Grand Caravan 2WD 1991 Dodge Ram 50 Pickup 2WD 1991 Lexus ES 250 1991 Mitsubishi Truck 2WD 1991 Plymouth Voyager/Grand Voyager 2WD 1991 Toyota Camry 1991 Toyota Camry Wagon 1992 Acura NSX 1992 Dodge Caravan/Grand Caravan 2WD 1992 Dodge Ram 50 Pickup 2WD 1992 Jeep Cherokee 4WD 1992 Jeep Comanche Pickup 4WD 1992 Mitsubishi Truck 2WD 1992 Plymouth Voyager/Grand Voyager 2WD 1992 Saab 900 1992 Saab 900 1993 Dodge Ram 50 Pickup 2WD 1993 Dodge Stealth 1993 Jeep Comanche Pickup 2WD 1993 Mitsubishi 3000 GT 1993 Mitsubishi Truck 2WD 1993 Toyota Camry 1993 Toyota Camry Wagon 1994 Mazda B2300/B3000/B4000 Pickup 2WD 1994 Mazda MPV 1994 Mitsubishi Diamante Wagon 1994 Volkswagen Corrado SLC 1995 Kia Sportage 2WD 1995 Mazda MPV 1995 Toyota Tacoma 2WD 1996 Jeep Cherokee 2WD 1996 Nissan Truck 2WD 1996 Toyota Supra 1996 Volkswagen Jetta GLX 1997 Chrysler Concorde 1997 Chrysler New Yorker/LHS 1997 Dodge Intrepid 1997 Eagle Vision 1997 Kia Sportage 4WD 1997 Mercedes-Benz C3 AMG 1997 Nissan Truck 2WD 1997 Toyota Supra 1997 Toyota T100 2WD 1997 Volkswagen Jetta GLX
The EPA "gave no reason its ratings were inaccurate or why some went up", according to USA Today. Karl Brauer, editor-in-chief of Edmunds.com, said, "It's unfortunate that consumers who had been researching and planning to trade in their vehicle ... are now left in the dust". "Consumers acting in good faith should not be penalized for undisclosed and last-minute changes made by the government", Kevin Smith, Edmunds.com editorial director, said in a statement.
The U.S. Department of Transportation ruled that deals involving cash-for-clunkers trade-ins based on old EPA mileage numbers and consummated before July 24 would be honored, but that deals consummated after July 24 on vehicles that became ineligible as clunkers due to mileage rating changes would not be honored.
Credit Depending on the type of car purchased and "the difference in fuel economy between the purchased vehicle and the trade-in vehicle", the amount of the credit given in the form of vouchers to eligible customers was either $3,500 or $4,500. New car dealers were able to reduce the purchase price by the amount of the voucher for which the customer was eligible.
Engine disablement and scrappage criteria
The program outlined a procedure to ensure that vehicles traded-in under "cash for clunkers" will not be resold by dealers by destructively disabling the engine (and thus also precluding the possibility that any mechanical engine components might be salvaged to be used in the repair of any other vehicles): The motor oil is drained and replaced with a sodium silicate solution. The engine is started and run until the solution becomes glass-like when heated, causing the engine's internal bearings, pistons and piston rings to abrade and ultimately seize. The salvage or scrap facility that acquires the vehicle cannot sell the engine, cylinder heads, or a "rolling chassis" from the scrap vehicle. The salvage or scrap facility can sell any other component (including the transmission and axles) from the scrap vehicle separately and may dismantle and warehouse the parts. The "hull" of the vehicle must be crushed within 180 days. Cut off or unbolted front-end assemblies may be saved and sold later, as well as the "top and back" of pickup cabs.
The outlined procedure described running the engine at 2,000 RPM "should disable the engine within a few minutes"; if not, then the engine should be allowed to cool off before repeating the procedure. Hazards associated with the intentional overheating and destruction of the engine include rupturing the radiator and hot water/steam, motor oil ejection, toxic fumes, and fire.
By completely disabling the engine, the CARS program avoided recycling schemes such as encountered in Germany, where authorities found that an estimated 50,000 scrapped vehicles were exported to Africa and Eastern Europe, where newer, safer cars of the type being destroyed in the West are prohibitively expensive. In contrast with the U.S. program, the German program only required dealers to drop off the scrapped vehicles at junkyards, thus allowing the illegal exports.
Auto recyclers and dismantlers criticized the U.S. program due to the requirement that the engine be disabled to prevent re-use of the car. To auto recyclers, a car's engine is considered the most valuable part of a junked car. Some recyclers refused to participate in the program, as well, due to the limited profit potential of junking a vehicle brought in under CARS.
Tracking VINs to avoid fraud