Cash for clunkers. You may have heard of this simple, yet seemingly confusing concept at one point or another. For those of you who don’t know, this is a recently-passed legislation currently awaiting the approval of President Obama. This is an environmentally-inclined trade-in program that will allow you to exchange your old car for a new one.

For those of you who are interested, here are the basic mechanics of cash for clunkers:

1.    Find out if you are driving a clunker

By definition a “clunker” is a car that can still be driven, and has been driven for the past 25 years. In addition, it should have 18 mpg or less as its fuel economy rating. If you don’t know yet what your car’s fuel economy rating is, you can find out through this website: http://www.cars.gov/index.html

2.    Do an automobile trade-in

Once you have concluded that you qualify for the program, you are now eligible to exchange your old car for a newer one. How it happens is that you first trade in your old car for cash, which you then use for the purchase of your new car. You’ll get more cash for buying a car with better mileage – as high as $4,500 sometimes. However, your new car must also follow the following standard: meet a fuel economy rating of at least 22 mpg. Also, your old car MUST have been insured for a year at the minimum before the trade.

When Can I Do This?

The sooner you act, the better. There is a limit to this legislation, in that it will only allow a maximum of a million new car purchases, with a time frame of July 1 to November 1 of this year. After that, the bill will be looked at again for a second time, and there will possibly be corresponding changes to this. 

Economic and Environmental Value – Check

This legislation is one that is truly admirable, and addresses two important needs of America today, given the current financial meltdown. It solves both an economic problem and an environmental problem. Economically, the program aims to boost automobile sales again, as the industry is one of the worst-affected by the economic crisis. It is also environmentally-sound, as it aims to promote and further awareness of the value of fuel efficiency. It also eliminates older and inefficient car models and replaces them with newer, more fuel-efficient cars.

This legislation is also not a cheap one, as this will cost $4 billion to execute – therefore, all Americans are encouraged to take a second look at their cars to see if they will qualify for the said program. All in all, the Cash for Clunkers program is a very strong legislation that may very well change the face of the automobile industry – perhaps for the better.