Monday, July 20, 2009

Cash for Clunkers: BUYERS BEWARE

If all goes according to plan, the CARS government stimulus program, “Car Allowance Rebate System”, aka “Cash for Clunkers” will goes into effect this Friday, July 24th. I’m predicting that this government program will be exploited by car dealers and that car buyers will be taken advantage of on a scale rarely seen.

These are the basic requirements to determine if your car qualifies:
Your trade-in vehicle must:

§ have been manufactured less than 25 years before the date you trade it in
§ have a "new" combined city/highway fuel economy of 18 miles per gallon or less
§ be in drivable condition
§ be continuously insured and registered to the same owner for the full year preceding the trade-in
§ The trade-in vehicle must have been manufactured not earlier than 25 years before the date of trade in and, in the case of a category 3 vehicle, must also have been manufactured not later than model year 2001

Note that work trucks (i.e., very large pickup trucks and cargo vans) have different requirements.

Here are some tips to avoid being one of the victims:

(1) Do not pay any attention to car dealers’ advertising on this program. Most of it is entirely misleading and deceptive. Go to the official government Web site, www.CARS.gov and read the real story. Beware of fake Web sites which purport to be the official government Web site.

(2) If you own a car that qualifies for the rebate, be sure that it’s not worth more than the government voucher. Before you consider excepting a check for $3,500 or $4,500 for your old car, be sure that it’s not worth even more. An older, cheaper car that will run is in higher demand today than ever before. In today’s terrible economic times, many people cannot get credit to buy a new car or nicer used car. Therefore they have to buy older, cheaper ones for cash. This high demand and low supply has raised the prices for “clunkers”. Get at least three bids for your old car from the used car managers at the dealerships that sell your make of car. If you live near a CarMax, they also pay top dollar for used cars. Although this is more trouble and time consuming, you may want to consider selling your old car to a friend, neighbor or listing it on Ebay.

(3) Be sure that the dealership you are trading in your clunker to, is registered with the Government. Registered letters were sent out last Friday, July 17, to tell dealers how to register. These dealers will be listed on www.CARS.gov. You can check this Web site to see if your car qualifies for getting bad enough gas mileage www.fueleconomy.gov/feg/sbs.htm.

(4) Verify that the $3,500 or $4,500 credit you are getting for your clunker is coming from the government and not from the dealer. A dealer could find that your car is worth more than the amount he can get from the government program. Or, the dealer may not really be registered for the program. Demand official verification that the government voucher for the VIN number for your car has been issued to this dealer.

(5) Buy the new car before you tell them you have an eligible clunker. You probably have heard the consumer tip, “don’t tell the dealer that you have a trade-in until you have negotiated the best price for the new car”. That tactic is even more important with the CARS program. The dealer sees your clunker as $3,500 or $4,500 in extra profit for him. Don’t let him see that extra profit but make it your extra savings on the best new car price you can negotiate. Remember to get at least three competitive bids on that new car. When you have selected the dealer with the best price, “spring” your clunker worth $3,500 or $4,500 on him and take that right off low price you already have locked in.

(6) Remember that this program does not apply to buying a used car. Although I believe it should, the car you are buying must never have been titled. If the dealer tells you otherwise, he is not using the CARS program and is tying to trick you into thinking you are participating.

(7) Why your clunker could be worth a lot more than $3,500 or $4,500. If sold separately, the parts in a car costing $3,000 can be worth more than $10,000 and more. Cars that are totaled are sold at auction to junk dealers who dismantle the car and sell the useable parts one at a time. Cars that can’t be sold in this country because of emissions or safety considerations can be exported to South or Central America where they have much looser regulations. It’s common in South Florida for cars with very high mileage to be exported because in other countries they have no rules against rolling back odometers or they aren’t enforced. Our government can’t track the VIN of a car sold out of the county. I predict that some dealers participating in the CARS program will be taking cash kick-backs from exporters and junk dealers; or setting up companies in different names to handle these kinds of transactions.

6 comments:

  1. Re: "Demand official verification that the government voucher for the VIN number for your car has been issued to this dealer."

    There is no actual "government voucher", read the FAQ on CARS.gov. The dealer submits documentation to the CARS program and then the government then reimburses the dealer. Personally I don't care as long as I get the $3500 or $4500 rebate credit when the deal closes.

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  2. Thanks for that clarification. You are right. The government has asked for bank account information for each registering dealer and this is probably so that they can wire the "voucher money" directly to the dealer's account.

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  3. Cashing In My ClunkerJuly 24, 2009 2:59 PM

    Regardless of your reservations about the whole concept, is your dealership signed up with the program and ready to take "Cash For Clunkers" trade-ins?

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  4. Dear "Cashing in my clunker",

    Yes, my dealership is signed in for "Cash for Clunkers" and anxious to participte in this "free money" program by our government. We will be happy to sell you a new Toyota and take the $3,500 or $4,500 from Uncle Sam to reduce the price of your new car.

    I wear two hats...an American taxpayer and a car dealer. As a taxpayer, I think the program costs Americans more than it will return in benefits. As a car dealer, I'll take every dime the government is willing to give me to sell another new car.

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  5. WHAT IS TO KEEP A DEALER FROM TAKING IN A CAR ON A USED CAR..GIVING YOU 1000 BUCKS TRADE THEN CLAIMING IT FOR 4500???

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  6. Dear Anonymous,

    You ask a very good question about a dealer not giving you the right credit for your clunker.

    There is nothing to prevent a dealer from not crediting you with the amount he receives from the CARS program for you clunker...except your diligence.

    Please read my blog article "Don't Let the Dealer Clunk You with Your Clunker". In this article I recommend that you negotiate your best price for the new car, not telling the dealer that you have a trade-in. When you have shopped at lest 3 dealers and found your best price, "spring your clunker on him". Then demand he reduce your negotiated price by the CARS allowance for your clunker...$3,500 or $4,500.

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