The federal government will now pay $3,500 or $4,500 for your old, gas-guzzling car or truck when you trade it in for a new vehicle.

The so-called "Cash for Clunkers" program is officially known as the Car Allowance Rebate System, or CARS. (Get it?)

It began July 1 and lasts through Nov. 1, or until the federal funding runs out.

If you've got an older vehicle that's still running but practically worthless, getting a guaranteed minimum of $3,500 on trade-in is a great deal -- great enough to make it worth considering buying a new car instead of a used one.

If you qualify, the rebate is incredibly easy to get.

But will the car or truck you have, and the car or truck you want to buy, qualify for the program?

Here are the basic rules:

• The car or truck you're trading in cannot be older than a 1984 model, though there are slightly different rules for larger trucks.
• It can't have a combined fuel-economy rating of more than 18 miles per gallon. To see if your vehicle qualifies, go to fueleconomy.gov. Select your vehicle make and model year. You'll see a red "Estimated New EPA MPG" banner. Just under the banner is a red "Combined" figure for your vehicle. That's your number.
• The vehicle must be drivable and legally owned and insured by you for at least one year.
• You can lease, rather than buy, the new car or truck, but the lease must be for at least five years.
• The sticker price of the new car or truck you're buying can't exceed $45,000.
• The combined fuel economy estimate for the new vehicle must be at least 22 m.p.g.

A major goal of the program is to replace cars that get poor gas mileage with ones that get better gas mileage. That's why the difference between the mileage of the clunker you're getting rid of and the new vehicle you're buying determines the size of your rebate.

Your new car or truck must get at least 4 m.p.g. better than your old one.

If the difference is between 4 m.p.g. and 9 m.p.g., then you'll qualify for $3,500.

If the difference is 10 m.p.g. or more, you'll get a fat $4,500.

The rules are a little different if you're trading in a pickup, sport-utility vehicle or van on a similar vehicle.

For small pickups, SUVs and minivans (which are considered "Category 1" trucks in the CARS program), the traded vehicle's fuel economy cap is the same as for cars, 18 m.p.g.

But if you're buying another Category 1-type vehicle (trading a clunker minivan for a new minivan, for instance), the new vehicle only needs to get 20 m.p.g. to qualify for the program.

If it gets 2 m.p.g. to 4 m.p.g. better fuel economy than your old truck, you'll qualify for a $3,500 rebate. If the difference is 5 m.p.g. or more, you'll qualify for a $4,500 rebate.

"Category 2" trucks are mainly full-size pickups and vans.

If you have one of those, you don't have to worry about the 18 m.p.g. cap. They're all eligible for the program.

But if you're replacing an old Category 2 truck with a new Category 2 truck, the new one has to get at least 15 m.p.g. and deliver a 1 m.p.g. improvement to qualify for the $3,500 rebate and a 2 m.p.g. increase for the $4,500 rebate.

To determine whether it makes financial sense to take part in this program, you have to know how much your car or truck is worth.

Edmunds.com or Kelley Blue Book provide very good estimates.

If you take the rebate, you're essentially selling your old car or truck to the government, and it is supposed to be taken off the road and scrapped.

You don't get the rebate and its trade-in value from the dealer.

But you can accept a CARS rebate and benefit from any rebates or discount financing the manufacturer might be offering.

The CARS rebate should be deducted from the vehicle price after manufacturer incentives are applied.

All of the rules won't be finalized until July 24, and federal officials suggest it might be wise to wait until then if you're going to take advantage of the program.

But you don't have to.

Just go to a participating dealer (most will be certified to participate in the program, but ask to be certain) and cut the best deal you can.

The dealer will deduct the applicable $3,500 or $4,500 rebate from the price, and you turn over the keys to your beloved clunker.

It's that easy.

One final thing: You don't have to do anything on the Internet to qualify for this rebate.

There already are numerous scams trying to steal personal information by claiming to "register" consumers for a clunker rebate. Ignore them.

The National Highway Traffic Safety Administration is in charge of the CARS program and has created a Web site called cars.gov to answer questions.

By Bill Visnic

Interest.com Contributing Editor