As car manufacturers struggle to sell vehicles in today’s economy, buyers are benefiting from some of the most aggressive pricing and incentives in recent memory. Now the federal government is jumping into the fray with its so-called “Cash for Clunkers” program.

Officially known as the Car Allowance Rebate System (CARS), the Cash for Clunkers program was created to help remove inefficient, higher-polluting vehicles from the roadways while providing an economic stimulus for consumers and auto manufacturers.

Here’s a quick rundown of the program:

• Your trade-in cannot be more than 25 years old and must be in drivable condition. In the case of very large pickups and vans (8,500 to 10,000 pounds gross vehicle weight), they must have been made since 2001.
• You must have owned your clunker for at least one year and it must be registered and insured for the last 12 months.
• Your clunker must get 18 miles per gallon (MPG) combined fuel economy or less.
• The new vehicle you’re purchasing must have a combined fuel economy of at least 22 MPG for passenger vehicles. For small trucks and SUVs, the new vehicle must have a combined fuel economy of at least 18 MPG.
• If your new vehicle achieves 4 to 9 MPG better fuel economy than your trade-in, the credit is $3,500.
• If the new vehicle has a combined fuel economy value that is at least 10 MPG higher than the traded-in vehicle, the credit is $4,500.
• Your clunker credit is subtracted from the price of the vehicle, and the dealership is reimbursed by the federal government.
• The program doesn’t require a voucher or additional paperwork on your part.

To see if your vehicle might qualify, try out one of the many online “clunker calculators,” like the one at the Kelley Blue Book website.

Keep in mind, the “Cash for Clunkers” credit you receive is in place of your vehicle’s trade-in-value; you don’t receive both. So, if your clunker is worth more than the credit, you’re better off taking the trade-in value as opposed to the clunker credit.

You can use your clunker credit to purchase or lease a new vehicle; used vehicles do not qualify. That’s an important consideration. Depending on your budget, it might make more sense to purchase a quality pre-owned vehicle. Don’t forget, in addition to that new car smell, you’ll also be facing higher monthly payments, increased insurance rates, higher registration fees and greater depreciation expense when your purchase new over used.

The Cash for Clunkers program officially started July 1, so if you just purchased and traded in vehicles that would have qualified under the program, you may still be eligible for the rebate. Check with the dealership where you purchased your vehicle.

CARS is scheduled to end Nov. 1 or whenever the $1 billion set aside for this program is depleted, so you need to act fairly quickly. For more information, visit www.cars.gov, the federal government’s official “Cash for Clunkers” website.

David Kexel is the Vice President of Marketing & Business Development for Arizona Central Credit Union, where he has worked since 1999. He has 12 years of experience in financial services marketing and has lived in Arizona for 21 years.