On June 24, 2009 the President signed into law the “cash for clunkers” provision aimed at removing older gas guzzling vehicles for more fuel efficient ones.  The “new” vehicle must be purchased between July 1 and November 1, 2009 and various rules apply if you are considering a light truck or a passenger car.

Generally, the vehicle being traded in must have been manufactured less than 25 years before the date of the trade in.  The vehicle is required to have had a “new” combined fuel efficiency of 18 miles per gallon or less and must also be in drivable condition.  One last requirement is that the vehicle you are trading in must have been continuously insured and registered to the same owner for a full year prior to the trade.

The new vehicle you purchase must be less than $45,000 to qualify for this tax incentive.  The tax credit is up to $4,500 depending on whether it is a light truck or car you are purchasing and if the improvement in fuel economy is either 10 miles per gallon more for a car or 5 miles per gallon for a light truck.  You will receive a $3,500 credit if the improvement is only 4 miles per gallon for a car, or 2 miles per gallon improvement for a light truck.