Sunday, Aug. 09, 2009

4. Clunker Math Is Complicated

Not everyone qualifies for the $4,500 rebate — some rebates are only $3,500. The difference is determined by how big a fuel-efficiency leap you are taking. If the car you buy has a combined fuel economy that is 4 to 10 m.p.g. higher than your clunker, the credit is $3,500. If the new car offers combined fuel economy that is at least 10 m.p.g. or better, then the credit rises to $4,500. For SUVs, the full credit comes with a 5-m.p.g. improvement.

Also, you won't be getting a check. The Department of Transportation pays the dealer, who takes the money off the price of the vehicle. About 10 days after the sale, the government will issue a financial credit to the dealer — assuming all program requirements have been met. It's better this way for the consumer because the credit does not get counted as taxable income, though there's no guarantee that your financially squeezed state government will not try to impose a sales tax on the amount of the rebate.