Can you imagine the government giving you money for your car and then making big scrap cube of it?!

Money for junk...what a wacky idea but it's true.  The President has signed a $2 billion replenishment for the Consumer Assitance Recycle and Save Act of 2009 (or CARS...catchy!), or more commonly "Cash for Clunkers."

Washington is jumping through hoops to try anything to revive the U.S. auto industry whose sales have plummeted 40% since last October.

Cash for Clunkers should help car dealers clear out inventory before the new 2010 models arrive. Edmunds.com estimates the program could add 600,000 to 1 million new vehicle sales in the next 12 months.

So, how does the program work and is a smart money move to accept a voucher from $3500 to $4500 to trade in your old gas guzzling car or truck for a brand spanking new model with better gas mileage?

On the surface the answer is a resounding...YES!

But hold on...not so quick.

These days, how many Americans can afford either to pay cash for a new car or are able to handle a monthly car payment hanging around their neck for 5 years?

If you're driving a car worth less that $4500 (if your car is worth MORE than $4500, don't ask for a rebate, just trade it in for the higher price)...usually there's a reason.

The reason? You, likely, can't afford to buy a new car.

But...if you are one of the lucky Americans who can afford a new car, but lacked the final push, here's what you need to know to help you make the final decision.

The offer begins July 24th and expires August 24th 2009.

In order to qualify, your old car must: 

• Get 18 miles per gallon combined (city and highway) or less
• Not be more than 25 years old
• Be drivable, and it must have been insured by and registered to the same person for at least the last year

New cars qualify only if they have a sticker price of $45,000 or less, and there are mileage requirements.

If your NEW vehicle is a:

1.  CAR or MINIVAN it must get 22MPG (combined...city and highway).  If the difference in MPG is of the clunker and the new car is 4mpg to 9mpg,- the rebate is $3500...if the difference is 10mpg or greater...the rebate is $4500.

2.  LIGHT DUTY TRUCK (under 6000 pounds) it must get a minimum of 18mpg.  If the difference in mpg between the old and new vehicle is 2mpg to 4mpg...you get a $3500 rebate...if the difference is 5mpg or greater, you receive a $4500 rebate.

3. HEAVY DUTY TRUCK (6000lbs. plus) it must get at least 15mpg.  The amount of rebate is the same as the light duty truck.

Mileage ratings back to 1985 may be found at www.fueleconomy.gov. 

The rebate can be combined with a manufacturers' discount, if available, and the alternative fuel tax credit.

How do I get this rebate?

Good question...the rebate is first approved by the car dealer which then receives an electronic funds transfer from the government when you are buying or leasing the vehicle. The amount of the rebate is then applied to your down payment.

So, the rebate is a credit toward the purchase or lease of a qualified new vehicle....not cash in your pocket.

For more information on the CARS program, go to its official website www.cars.gov.

Will this program work, that is, stimulate new car and truck sales?

Hard to say but it's working pretty well, so far, in Europe.

Learn more about new government incentives and tax rebates that can put more money in your pocket.