How to Use a Car Allowance

A car allowance (another term for the "Cash for Clunkers" program) allows buyers of new cars to trade in their older, less-fuel efficient vehicles for new, fuel-friendly cars. The program gives $3,500 to $4,500 for older cars. This program is for literal clunkers since it would not make sense to use this car allowance for vehicles that are worth more than the car allowance amount.

Instructions

1

Find out if your old vehicle is eligible for a car allowance. According to Edmunds, the car must be in drivable condition, is owned in your name has had insurance for the past year, was manufactured less than 25 years before the month you trade in your vehicle, and gets less than 18 miles per gallon.

2

Turn your eligible old vehicle into the dealership. The dealership will then give you a "credit" of $3,500 to $4,500 to purchase a new vehicle.

3

Choose a new vehicle with better fuel economy. Keep in mind while browsing through cars that you get an additional $3,500 to $4,500 towards this new vehicle.

4

Purchase your new vehicle with your car allowance.