Clunkers for Cash: Myths vs. Facts

Myth: Dealers can start participating in the CARS program July 1.

Fact: While the law states that the program begins on July 1, it also states that the National Highway Transportation Safety Administration has 30 days from when the President signed the bill to finalize the rules of the program. So, in reality, the government has until July 24 to develop and finalize CARS rules. Dealers transacting CARS-type transactions before then risk violating the rules and could lose $3,500, $4,500, or face up to a $15,000 fine. That risk to reward ratio is too high. I suggest dealers wait until the rules are finalized to offer vouchers. Once dealer registration for the program is open, dealers can register to participate, and can count on receiving electronic reimbursement from NHTSA for the vouchers.

Myth: Consumers will receive their car’s trade-in value PLUS a CARS program voucher of up to $4,500.

Fact: The vouchers are offered in place of a trade-in value since the car must be scrapped. So if a car is worth more than $4,500, its owner has no reason to participate. Thus, the ‘clunkers’ aspect of the program. In addition, a dealer must disclose the scrap value of the vehicle to the customer.

Myth: All new cars and light trucks are eligible to be part of the program.

Fact: The program only applies to customers buying new vehicles that meet the program’s mileage standards and have MSRPs of $45,000 or below.

Myth: Consumers can apply a voucher to a lease.

Fact: Not really. The program applies only to leases of 60 months or more, which are, let’s just say, rare.

Myth: Trade-ins have to be at least 8 years old to be eligible for the program.

Fact: There is no age requirement on the cars being scrapped. As long as the vehicle is not more than 25 years old, and is rated at getting less than 18 mpg city and highway combined, it is eligible. Check mileage ratings here: www.fueleconomy.gov/feg/findacar.htm.

Myth: Consumers can buy a $500 junker and trade it in the next day to get a voucher for a new vehicle.

Fact: Don’t try to outsmart Uncle Sam. The clunker must be in drivable condition, and registered and appropriately insured to the same person for at least one full year preceding trade-in.

Myth: The program only applies to the first 1 million cars.

Fact: The CARS program is funded with $1 billion, and will continue until the money runs out, or we reach the planned end date of November 1.

Myth: Dealers can register to participate in the program on a variety of websites.

Fact: Dealers must register for the program but registration is not yet open. According to the government, it should be up and running by July 23. Be wary of any website other than the official government website www.cars.gov.

Myth: The CARS program applies only to vehicles built in the United States.

Fact: All brands, international and domestic, are eligible for participation.

Myth: The CARS voucher replaces manufacturer rebates and discounts, and other government incentives.

Fact: The voucher can be used in addition to other discounts and factory rebates. So, for example, a consumer can use their voucher along with a hybrid vehicle credit and manufacturer rebate to buy a new fuel-sipper.