Cash for Clunkers Returns

A $2 billion infusion to the expiring Cash for Clunkers program comes at a time when manufacturers are offering major additional rebates. Lost in the media blitz, however, is a signifigant tax break for new-car buyers that lasts until the end of the year.

After burning through $1 billion in the first week, the government’s cash-for-clunkers program got an infusion of $2 billion more after the Senate passed a bill authorizing the additional cash. That amount will pay for another 500,000 cars to be traded under the program. Prospective car buyers may need to start shopping early though, as heavy demand and the lack of inventory on dealer lots may lock them out of a deal before the money runs out again. Still, if that happens, or if you’re not the owner of an eligible clunker, there are still plenty of car maker’s perks to help get you into a new set of wheels.

Leading the rebate parade is Chrysler, which is offering up to $4,500 back on all Chrysler, Dodge, and Jeep models on top of any rebate you might get from the cash-for-clunkers program. Ford and General Motors aren’t quite as generous, with Ford giving rebates ranging from $300 to $3,000 to buyers of several selected models. GM will spring for up to $4,500 on the Cadillac XLR, but rebates on other selected models are lower. Even foreign car makers are getting into the act, with Kia, Nissan, and Toyota all offering rebates. For a full list of rebates, check out the manufacturers’ Web sites or Edmunds.com.

Lost in the media blitz about the cash-for-clunkers program is a tax break for new-car buyers. Buy a new car between now and the end of the year and you can write off any sales tax on the first $49,500 of the cost. The deduction is available to joint filers with adjusted gross incomes of less than $250,000 ($125,000 for singles) and you can take it even if you don’t itemize.