Tax Credits Could Fuel Your New, More Efficient, Car Purchase

BY Adam Wasch, Energy Outreach Consultant for CCHRC and UAF CES
Energy Focus: Fairbanks Daily News-Miner July 7th, 2009, Section A3

More than you know, I am fortunate to have a girlfriend. I mean that. In no way do I wish to suggest that I am superior to her, for I would be lost without her. But even compared to my fur-covered and grubby car, my girlfriend’s car is sordid. There’s the usual refuse, recycling, and ground-in trail mix. And then there’s the plant life. A leaky water jug and a punctured bag of flax seeds have transformed her car’s backseat into a motile Chia Pet.

At nearly 200,000 miles, there are also burgeoning mechanical reasons for my girlfriend’s car to be replaced. Good thing for her the automobile industry is in retreat and a deficit-fuelled federal government is providing incentives aplenty to buy a new car. One such new incentive is the so-called cash-for-clunkers program, formally known as the Car Allowance Rebate System (CARS).

The federal government has decided to pay up $4,500 for you to turn in your old car and buy or lease a new one. Think of it as stimulus for the economy and the environment, since the credit is based on how fuel efficient a selected new vehicle is compared to your trade-in. The credit, if you qualify, is applied toward the purchase price of a new vehicle – of any make – by a licensed dealer.

There are a bunch of details. But if you can’t stand to read more, I recommend simply visiting one of the car manufacturer websites, many of which have a convenient wizard that determines which of their new cars, if any, qualify for the credit relative to the year, make, and model of your trade-in. Dealers are responsible for the paperwork on this credit and are interested in selling cars, so their information is probably reliable.

CARS requires your old vehicle to have had a combined city/highway fuel economy of 18 miles per gallon or less when it was new. It must not be older than 25 years. Also, your trade-in can’t be some car you’ve been using as lawn ornamentation. It has to run and have been insured and registered for a full year before your transaction.

Beyond these requirements, the amount of credit you receive is calculated by comparing your old car’s official combined fuel mileage to the new car’s, as determined by the Environmental Protection Agency. These numbers can be found online. The type of vehicle you are trading in and buying can also affect the final credit amount.

Sadly for heirloom cars, all the cars traded in are required to be destroyed. Some parts may be sold for scrap farther down the food chain, but the engine and transmission are condemned. This means that, in fact, you might not receive as much money for the car as it could be worth in the private market, depending on its condition. On the upside, the CARS credit is not taxable as income. The program expires in November or sooner if funds run out.

Not interested in a trade-in? There are still tax credits available to help you afford a more fuel efficient car. High-efficiency diesel, electric, hybrid, and alternative fuel vehicles each may qualify for up to $3,400 in tax credits. These tax credits can also be combined with the CARS program. Again, visit their website and look for references to tax incentives. You can also call 866-227-7891 for more information about CARS.

As for me, I won’t miss my girlfriend’s car. But I hope I last as long as it has.

Adam Wasch promotes energy awareness for the Cooperative Extension Service (CES) and the Cold Climate Housing Research Center (CCHRC).
For questions or comments please contact CCHRC at (907) 457-3454