Jean's Blog

Ask Jean Thursday: Cash for Your “Clunker”?

Posted by Jean

This week’s question comes from Mark in Waukesha, Washington. He writes:

“We have a car loan, which will be paid off late this summer to early this September. We are considering getting rid of a 1998 Oldsmobile SUV due to gas prices. Is it a good time to buy a new vehicle or a used vehicle or should wait until auto industry quiets down?”

Answer: With the auto industry in turmoil, there are some exceptional deals out there if you’re looking buy either a new or used vehicle. If you plan to have your car loan paid off in the coming months, and you’re in otherwise good financial standing, it could potentially be a good time for you to take advantage of the deals available to consumers.  

I typically advise people to buy used cars, and drive them into the ground. However, in light of the current industry conditions and new legislation coming down the pike that will make purchasing new cars more appealing, my opinion has changed slightly.

Recently, Congress has been considering a program to spur new car sales, known as the “Cash for Clunkers” program. This program would allow owners of cars and light trucks rated at 18 mpg or less (EPA combined) to trade their vehicles for vouchers worth up to $4,500 towards the purchase of a new, more fuel-efficient vehicle. For more information on the status of the program, and to see if your Oldsmobile made the list of “clunkers,” visit the Cars.gov.

If the Cash for Clunkers bill passes and your vehicle qualifies, there are ways to maximize your voucher to get a new vehicle for close to what it would cost you for one that’s used. According to Kelly Blue Book, the most affordable way to take advantage of the program would be to purchase the 2009 Hyundai Accent. The Accent is the lowest priced car in America and is one rated at 29 miles per gallon. If you’re eligible for Cash for Clunkers, you could have the accent for just slightly more than $6,000 plus tax, title and license. An added bonus:  By driving this fuel-efficient model, you’ll save about $750 a year on gas. If the Accent isn’t your style, you could potentially have a 2009 Nissan Versa for about $45 more.

However, if you must buy used, a good rule of thumb is to first consider a manufacturer’s certified pre-owned used car, as suggested by Joseph DeMatio of Automobile Magazine. “These cars are usually gone over with a fine-toothed comb by a dealer. The car has to meet 150 criteria for being in good shape,” said DeMatio. DeMatio cautions, however, that today, there are far more good new cars available than used cars. “Really good used cars are getting snapped up, they aren’t as easy to find,” says DeMatio. DeMatio also offered one last word of advice: Bargain hard. “Bargains are available…I certainly wouldn’t be paying sticker price for anything these days in terms of a new car,” says DeMatio.