Will Cash for Clunkers Help You Buy a New Car?

If you’re an owner of an older car, truck or SUV and you’re looking to upgrade, you could get up to $4,500 off your purchase, thanks to a proposed government-funded "cash for clunkers" program.

In addition to generous incentives and financing plans being tossed around by GM (Stock Quote: GM), Ford (Stock Quote: F), Hyundai and other automakers to lift car sales, the proposed bill, also known as the Fleet Modernization Bill, aims to put more fuel efficient vehicles on the road by giving incentives to consumers, but there's some question as to who the bill really benefits.

How It Would Work

The House Energy and Commerce Committee agreed on the program last month. (You can see a PDF fact sheet here.) The Senate is expected to vote on the incentive program in June.  If the proposed bill passes, you could get a $4,500 voucher for the purchase or lease of a brand new passenger car that gets at least 10 more miles per gallon than the vehicle you trade in. (That's combined fuel economy, folks, or the average of city and highway MPGs.) If you plan to buy a new car that gets at least four more miles per gallon than your old one, you can get a voucher for $3,500.

A Budgetary Bump in the Road for Some
Those who need a new car but can’t afford a brand new one—for example, drivers who’ve had the same car for eight years—may not stand to benefit from the program, says John Wolkonowicz, senior auto analyst at market research firm IHS Global Insight.

“Taking on a car loan is a big deal," he adds.