What is the Car Allowance Rebate System?
The Car Allowance Rebate System is a new program from the government that will help consumers pay for a new, more fuel efficient car or truck from a participating dealer when they trade in a less fuel efficient car or truck.
What is NHTSA doing to implement the program?
As required under the law, NHTSA will publish rules for the program by July 24. We are currently working closely with manufacturers, dealers, and disposal facilities to get a workable, effective program up and running.
Will consumers need to get a voucher or sign up for this program?
No. Consumers do not need a voucher and are not required to sign up or enroll in this program. If you are a participating new car dealer, you will apply a credit, reducing the price of the new vehicle at the time of purchase or lease, provided the vehicle you sell or lease and the vehicle traded in meet the program requirements. You will then obtain reimbursement from the government.
How will dealers know if cars or trucks are eligible trade-in vehicles?
There are several requirements.
In general, the trade-in vehicle must
* have been manufactured less than 25 years before the date of the trade in
* have a "new" combined city/highway fuel economy of 18 miles per gallon or less
* be in drivable condition
* be continuously insured and registered to the same owner for the full year preceding the trade in
* The trade-in vehicle must have been manufactured not earlier than 25 years before the date of trade in and, in the case of a category 3 truck, must also have been manufactured not later than model year 2001
Where can dealers find the combined city/highway fuel economy ratings for trade-in vehicles?
Go to http://www.fueleconomy.gov/feg/sbs.htm and click on the model year of the vehicle, the make, and then the model. Under the words "ESTIMATED NEW EPA MPG" in the red banner, there is a red number with the word "COMBINED" under it. That is the new combined city/highway fuel economy for that vehicle.
Does the program apply to vehicle leases?
Under the program, consumers may purchase a new vehicle or lease a new vehicle, provided the lease period for the new vehicle is at least five years.
Is there a cap on the price of the vehicle a dealer can sell or lease under the program?
Yes. The manufacturer's suggested retail price cannot exceed $45,000.
Does the program apply if a dealer wants to sell a used car?
No. The program does not apply to the purchase of used vehicles.
In addition to the credit, do consumers expect full trade-in value for their vehicle?
No. The law requires the trade-in vehicle to be destroyed. The law requires you to disclose to the consumer an estimate of the scrap value of their trade-in vehicle.
I don't sell American cars, but would like to participate in the program. Is this program only for American cars?
No. Consumers may trade in or buy a domestic or a foreign vehicle.
Are trucks included in the CARS program? Some trucks don’t have fuel economy ratings. Are trucks eligible trade-in vehicles?
Maybe. Some trucks, such as work trucks, were never rated for fuel economy. For these trucks, age is the only criterion for determining whether they are eligible trade-in vehicles. If a consumer has one of these trucks, it must be from model year 2001 or earlier, but also the date of manufacture must be less than 25 years from the date the trade-in date, to be an eligible trade-in vehicle. Other restrictions may also apply.
Is the credit subject to being taxed as income to the consumers or to the dealers that participate in the program?
The CARS Act expressly provides that the credit is not income for the consumer. However, the credit will be considered as income for the dealer.
Do consumers have to pay State or local sales tax on the amount of the CARS program credit?
The question of whether a consumer must pay State or local sales tax on the amount of the CARS program credit would depend on the sales tax law of each State or locality. Dealers should review the law of their respective States or consult a tax advisor to answer this question.
Is there a list of new vehicles that may be acquired under the CARS program?
The CARS Act applies to new vehicles. Thus, used vehicles do not qualify under the program.
The new vehicle must have a manufacturer's suggested retail price of not more than $45,000. That price appears on the window sticker on new vehicles. The new vehicle must also achieve minimum combined fuel economy levels. For passenger automobiles, the new vehicle must have a combined fuel economy value of at least 22 miles per gallon. For category 1 trucks, the new vehicle must have a combined fuel economy value of at least 18 miles per gallon. For category 2 trucks, the new vehicle must have a combined fuel economy value of at least 15 miles per gallon. Category 3 trucks have no minimum fuel economy requirement; however, there are special requirements that apply to the purchase of category 3 vehicles.
As noted above, the CARS Act also requires that NHTSA make available on an Internet website a comprehensive list of new vehicles that meet the requirements of the program. Until that information is posted on the program's website, you may determine whether a new vehicle meets the fuel economy requirements of the program in two ways. First, the combined fuel economy of a new vehicle will be posted under the heading "Combined Fuel Economy" on the window sticker ("Monroney label") of a new vehicle. Second, you may also find the combined fuel economy value of a new vehicle by visiting http://www.fueleconomy.gov/feg/findacar.htm and searching for their vehicle to find its combined fuel economy value. When searching that website, you will need to know their vehicle's model year, make, model, engine size, and transmission type.
What are the different categories of eligible vehicles?
The CARS Act divides the eligible vehicles into four groups: passenger automobiles; category 1 trucks; category 2 trucks; and category 3 trucks. NHTSA will soon publish a list of the vehicles that fall into these groups. For the present, we describe here the statutory definitions, give examples of types of vehicles that satisfy those definitions, and refer to the Day One Notice on cars.gov.
The term “passenger automobile” and its definition are borrowed from the fuel economy statute. The definition excludes from that term (1) vehicles that NHTSA has determined are not manufactured primarily for transporting persons and (2) vehicles that are capable of off-highway operation. Vehicles not manufactured primarily for transporting persons include pickup trucks and certain vehicles that permit expanded use of the vehicle for cargo-carrying purposes. See 49 CFR 523.5(a). Under NHTSA's regulations (49 CFR 523.5(b)), there are two groups of vehicles with capability of off-highway operation. The first includes vehicles that have 4-wheel drive and have at least four out of five specified physical characteristics relating to ground clearance. The second includes vehicles that are rated at more than 6,000 pounds gross vehicle weight and have at least four out of five specified physical characteristics relating to ground clearance, but do not have 4-wheel drive. Passenger automobiles are what are commonly known as passenger cars.
A category 1 truck is a nonpassenger automobile. This category includes sport utility vehicles (SUVs), small and medium pickup trucks and small and medium passenger and cargo vans.
A category 2 truck is a large van or a large pickup truck, based upon the length of the wheelbase (more than 115 inches for pickup trucks and more than 124 inches for vans). Note: some pickup trucks and cargo vans exceeding these thresholds are treated as category 3 trucks instead of category 2 trucks.
A category 3 truck is a work truck and is rated between 8,500 and 10,000 pounds gross vehicle weight. This category includes very large pickup trucks (those with cargo beds 72 inches or more in length) and very large cargo vans.
By July 24, NHTSA will make available on an Internet website a comprehensive list of the trucks that fall into these categories and meet the requirements of the program.
What is the value of the credit for the purchase or lease of a new passenger car?
The value of the credit for the purchase or lease of a new passenger car depends upon the difference between the combined fuel economy of the vehicle that is traded in and that of the new vehicle that is purchased or leased. If the new vehicle has a combined fuel economy that is at least 4, but less than 10, miles per gallon higher than the traded-in vehicle, the credit is $3,500. If the new vehicle has a combined fuel economy value that is at least 10 miles per gallon higher than the traded-in vehicle, the credit is $4,500.
What is the value of the credit for the purchase or lease of a new van, pickup truck or SUV?
The value of the credit given for the purchase or lease of a category 1 or 2 truck also generally depends on the difference between the combined fuel economy of the vehicle that is traded in and that of the new vehicle that is purchased or leased. If the new vehicle is a category 1 truck that has a combined fuel economy value that is at least 2, but less than 5, miles per gallon higher than the traded-in vehicle, the credit is $3,500. If the new category 1 truck has a combined fuel economy value that is at least 5 miles per gallon higher than the traded-in vehicle, the credit is $4,500.
If both the new vehicle and the traded-in vehicle are category 2 trucks and the combined fuel economy value of the new vehicle is at least 1, but less than 2, miles per gallon higher than the combined fuel economy value of the traded in vehicle, the credit is $3,500. If both the new vehicle and the traded-in vehicle are category 2 trucks and the combined fuel economy of the new vehicle is at least 2 miles per gallon higher than that of the traded-in vehicle, the credit is $4,500. A $3,500 credit applies to the purchase or lease of a category 2 truck if the trade-in vehicle is a category 3 (work) truck that was manufactured not later than model year 2001, but not earlier than 25 years before the date of the trade in.
What rules apply to new work trucks?
A work truck, which is called a category 3 truck under the CARS Act, is subject to special rules. Work trucks are not rated for fuel economy by the EPA. Thus, the eligibility of work trucks for the program does not depend on combined fuel economy. Instead, work trucks may only be traded in under the program if they were manufactured not later than model year 2001 and not earlier than 25 years before the date of the trade in. In addition, work trucks may only be traded in for the purchase of a category 2 truck or another category 3 truck that is of similar size or smaller than the traded-in vehicle. Finally, the Act provides only for a $3,500 credit for trading in a work truck.
The CARS Act limits the amount of funds that can be used to provide credits for purchases or leases of work trucks. Only 7.5 percent of the funds appropriated for the program may be used for credits for work trucks. Once that limit is reached, NHTSA will stop making payments for these transactions. NHTSA will keep the public informed as to the funds that remain available for these credits.
May dealers use the credit in combination with manufacturer rebates or discounts?
The CARS Act requires dealers to use the credit under the CARS program in addition to any rebates or discounts advertised by the dealer or offered by the new vehicle's manufacturer. You may not use the credit to offset these rebates and discounts.
Can this credit be combined with other government incentives?
Yes. Consumers can combine this with other State and Federal incentives, such as the hybrid vehicle credit. For information on this credit, refer consumers to http://www.fueleconomy.gov/Feg/tax_hybrid.shtml
Are consumers allowed to receive or use more than one credit under the CARS program?
No, the CARS Act specifies that not more than one credit may be issued to a single person, not more than one credit may be issued for joint registered owners of a single eligible trade-in vehicle, and that only one credit under this program may be applied toward the purchase or lease of any single new vehicle.
Can dealers charge a fee for selling or leasing a vehicle under the CARS program?
While dealers can charge normal types of fees, the CARS Act specifically prohibits you from charging a fee for selling or leasing a vehicle under the program.
Can a dealer resell the traded-in vehicle?
The CARS Act requires that the trade-in vehicle be crushed or shredded so that it will not be resold for use in the United States or elsewhere as an automobile. The entity crushing or shredding the vehicles in this manner will be allowed to sell some parts of the vehicle prior to crushing or shredding it, but these parts cannot include the engine or the drive train.
How and when will NHTSA provide more details about the CARS program?
The rule implementing the CARS Act will provide specific detail regarding the process for registering dealers, the manner in which dealers will be reimbursed for eligible transactions, the requirements and procedures for disposing of trade-in vehicles, and the means for enforcing the program's requirements. NHTSA must issue those regulations on or before July 24, 2009, legislation.
In the final rule, NHTSA will seek to balance the need to provide prompt payment to dealers with the need to prevent fraud and preserve records for the purposes of enforcing program requirements. NHTSA is meeting with a variety of groups to ensure that a proper balance is struck. NHTSA will also need to set up and staff a new office to administer the CARS program.
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