Cash For Clunkers Or (CARS) Buyers Must Beware
On Weds June 24th President Obama signed the much debated “Cash for Clunkers” bill which in summary allows a buyer to trade-in his/her old gas-guzzler for a new more fuel efficient ride and get up to $4,500 in a voucher toward the purchase price of this new vehicle. The program will now be known as Car Allowance Rebate System (CARS). There was opposition on all sides to this bill. The environmentalist felt the bill did not go far enough to improve fuel economy.
They pointed to the fact that one of the new vehicles that qualified was the Hummer 3. The automotive industry supporters feel that more that than the $1 billion that has been allocated is needed to jump start the car sales. This amount would allow approximately 250,000 consumers to participate in the program. Note, the original Cash for Clunkers bill had a $4 billion price tag. And of course, there are many who feel we have spent enough of the tax payers money to bail out the automotive industry. About $60 billion has been allocated so far, what is another billion.
OK, it is now time to move on and stop the “Why this program will not work and is a waste, etc”. This program can do some good. How many things have come of out Washington lately that will actually stimulate consumer spending? In all the bailout money what can we really point to that has helped we understand. The Cash for Clunkers program will stimulate car buying and has shown to do this in Europe, proving to be very successful. The American people can understand this program and will get factual results on how it is doing. American’s understand car sells numbers.
As a summary, the basic rules for Cash for Clunkers are:
o Your vehicle must be less than 25 years old on the trade-in date.
o Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements, that is trucks classified as non-passenger vehicles).
o Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in date. The dealer must monitor this closely.
o Trade-in vehicle must be drivable. I would say this might be up for interpretation.
o Owners who purchase a new passenger car that gets at least 4 mpg higher than their old “clunker” get a $3,500 voucher. If the mileage difference is more than 10 mpg, the consumer gets the full $4,500.
o Buyers of small trucks and SUVs need less of an improvement to get the same amounts. If the new vehicle gets at least 2 mpg more than the “clunker,” a $3,500 voucher is issued; for new trucks or SUV’s getting 5 mpg, the new car owner gets $4,500.
o Money can only go towards purchase or lease of new vehicles that qualify. Used cars need not ably.
o Qualifying lease means a lease of an automobile of not less than 5 years.
o The fuel efficient automobile must have a MSRP of $45,000 or less.
o You don’t need a voucher, dealers will apply a credit at purchase and will get their money from the government.
o Program to run from July 24 to November 1, 2009 or when the funds run out whichever is sooner.
The National Highway Traffic Safety Administration (NHTSA) is responsible for formulating the final rules and how to administrate the program with the dealers. They have 30 days to get this done and roll-out the program with the roll-out date being July 24, 2009
Buyers Beware!
Why do I make the statement buyer beware? Of course in every new program there are the scammers and opportunist who are just waiting to take advantage of the uninformed. There currently are websites offering to pre-register you for the CARS program and register you with local dealers. As a buyer you do not need to pre-register with anyone. I repeat do not pre-register, do not give out your personal information, especially your social security number.
The government is handling the program and will not be turning it over to any 3rd party. The CARS program will not request electronic submission of information from the individual consumer. When the program is finalized by the NHTSA dealers will then sign up with the NHTSA if they want to participate. $50 million of the $1 billion for this bill has been set aside to administer this 3 month program. Hopefully that is enough for the NHTSA to do a good job.
It will be interesting to see how honest the individual dealers will be with explaining how the program works. On the national level you know that GM, Ford, Chrysler etc will do a very good job of marketing this program. What I am talking about is when you walk onto the showroom floor. Remember, we are talking about car salesman here. A key point for the consumer to be aware of is that this rebate program is not to be taking the place of any current rebates the dealer may have.
The bill states ” requires the dealer to use the voucher in addition to any other rebate or discount advertised by the dealer or offered by the manufacturer for the new fuel efficient automobile and prohibit the dealer from using the voucher to offset any such other rebate of discount”. Also bear in mind that Cash for Clunkers has no impact on the cash-back and financing incentives that manufacturers offer; using the CARS credit won’t stop you from cashing in on those deals also. Also any other government rebates, such as for hybrids, can be used with the CARS program.
Be mindful that the dealer cannot charge you a specific fee for administering the CARS program when you purchase or lease. They can only charge their normal type of fees. Do not let a dealer charge you an extra $250 for CARS admin fee. You know some may try.
Be an educated consumer. Know the rules. Get your credit and loan lined up before you start your shopping. The CARS program can be a great opportunity for you.
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