The government’s Cash for Clunkers program was up and running on July 1st, but many auto dealers were hesitant to participate until they could read the entire rules and regulations. That happened this Friday. Customers will be able to collect up to $4,500 for a trade-in car. The program is funded with $1 billion and when the money is gone, so is the program.

Lawmakers tried to close loop holes by requiring that a trade in vehicle must have been insured for at least one year before the trade in (and you have to prove it). This will prevent would be scammers from purchasing a vehicle at a junk yard, getting a few free insurance quotes and taking the vehicle to a dealer to collect the cash on a new purchase.

Unfortunately, the biggest problem with the trade in is that you must trade your vehicle for one of a higher gas mileage. While, in theory, this sounds like a good plan, you only have to trade up 4 mpg for cars, 2 mpg for SUVs and 1 mpg for large trucks for at least a partial rebate. The minimum requirement for purchase is 22 mpg for cars, 18 mpg for SUVs, small pickups and minivans, and 15 mpgs for large vans and trucks. Plus the vehicle must have a list price of under $45,000.

In theory, I could trade in my 2003 minivan for one with just 2 mpg better gas mileage. My minivan, while still in good condition and having the minimum requirements for new purchase, would have to be junked. Yup. That is the rule. All trade in vehicles have to be junked. Sounds like a potential waste to me.

It will be interesting to see how many vehicles are traded in under this program.