July 28, 2009

Cash for Clunkers carries many requirements
Rebate program kicked in last week

Mark Maynard
Union-Tribune Staff Writer

The just-launched Cash for Clunkers program is raising optimism and confusion among some new-vehicle dealers and consumers as they learn details about how the program works.

The Car Allowance Rebate System funnels $1 billion from the U.S. government to jump-start new-vehicle sales and clear out up to 250,000 dirty and inefficient vehicles.

The program offers credits of $3,500 or $4,500 toward the purchase of a new, more fuel-efficient vehicle. Eligible trade-ins, up to 25 years old, must get an EPA combined fuel economy of 18 mpg or less.

The law became effective Thursday but is retroactive to new vehicles bought since July 1.

“The act will motivate people to go into dealerships,” said Jack Nerad, editorial director at KBB.com . “But many people may be disappointed that their car doesn't qualify, whether for time of ownership or any of several other details.”

As with all government programs, there are rules.

Along with meeting the vehicle age and fuel economy, trade-ins must have been registered, titled, insured and owned for at least one year. The maximum price allowed for the new vehicle is $45,000.

“It will be interesting to see how many people are driving a car worth $4,500 or less and have all the requisite documentation and can afford and want to buy a new car,” Nerad said.

The program runs through Nov. 1, or until the money runs out. The National Highway Traffic and Safety Administration, which oversees the program, has said the money is liable to run out sooner than later.

“They aren't advising consumers to act this week,” Nerad said. “But with the amount of interest being shown, NHTSA is not convinced the money will last till Nov. 1.”

The program brought some new business to Witt Lincoln Mercury in Mission Valley, owner Ed Witt said.

“It was the majority of our sales for the weekend,” he said. “People were trading in second, third or fourth vehicles in the family fleet. They feel good about getting a safer and much more efficient vehicle and taking advantage of Uncle Sam when they can. It's like free money.”

Kearny Mesa Hyundai also had a large increase in showroom traffic last weekend and sold 11 new vehicles to customers who qualified for the rebates, general manager Al Stein said. The trade-ins were across the spectrum, including a Toyota 4Runner, a couple of Cadillacs and Ford trucks and luxury models from Lexus and Infiniti, he said.

Still, not all dealers were excited about the program.

“It's a good theory but a scary process (for the dealer),” said Frank Trulo, owner of Suzuki of Escondido. He was concerned that dealers might not be reimbursed by the government for all the credits they give to buyers.

“On a typical weekend in San Diego there are 400 to 500 new cars sold. So multiply that across the country and I think the money will run out long before Nov. 1.

“And what happens if the billion dollars runs out quickly and you've sold 40 cars and are waiting to collect those $4,500 rebates?” he said. “Dealers have not been properly prepared.”

Consumers interested in the program should not expect trade-in value for their vehicles. Trade-ins will be scrapped and the government credit takes the place of any resale value.

Someone with a car worth $6,000 is better off to trade it in and take advantage of available incentives, Nerad said.

But not all clunkers are created equal.

When trading in a passenger-car clunker, consumers must buy a new car that gets at least 22 mpg and is an improvement of 4 to 9 mpg over the old vehicle to qualify for the $3,500 credit or an improvement of 10 mpg to get the $4,500 credit.

New light-duty trucks must get at least 18 mpg and be an improvement of 2 to 4 mpg over the previous vehicle for the $2,500 rebate and 5 mpg or more for $4,500.

Some agencies have been critical of the CARS program as not doing enough to help the U.S. auto industry or the environment.

But it is a start, KBB's Nerad said.

“Like many government programs, CARS is a compromise,” he said. “It is a compromise between what businesspeople want and what environmentalists want. It doesn't do collectively what each of the groups want, but it does something that each group can agree on.”

---

Mark Maynard: (619) 293-1296;

Related Terms: Mission Valley, Kearny Mesa, Escondido