The BBB is urging all its auto dealers to follow the final 136-page set of guidelines for the Consumer Assistance to Recycle and Save -- or CARS -- program, otherwise known as "cash for clunkers," that were issued by the National Highway Transportation Safety Administration (NHTSA) on Friday, July 24.
The CARS program officially begins today, although some dealers began promoting and offering the discount offer on July 1. However, those transactions are subject to verification under the final program rules issued July 24. Rebates are limited to transactions between July 1, 2009, and November 1, 2009, OR when the $1 billion in allocated funds are exhausted — even if that occurs before November 1.
The BBB urges consumers to go to CARS.gov before making a purchase under the program. Before this program even officially launched, scams were popping up online, trying to falsely convince consumers that they must first pre-register and provide their Social Security numbers and other identifying information in order to participate. Consumers do not need to register or provide any personal information to an outside source before taking advantage of the trade-in credit with a qualified auto dealer who is the one required to register for the program.
Details will vary with each individual purchase, but basically the federal government will contribute $3,500 or $4,500, depending on the fuel mileage of the old vehicle involved, toward the purchase of a new vehicle if the trade-in vehicle gets no better than 18 miles a gallon, and if the vehicle was built within the past 25 years. The trade-in will be sent to a junkyard and cannot be driven again.
The rules specify that the vehicle purchased can't cost more than $45,000, though the new regulations modify that to make $45,000 the vehicle's base price. Options, taxes, shipping and other features can raise the price to any level, as long as it starts at $45,000 or less. Under the program, consumers may purchase a new vehicle or lease a new vehicle, provided the lease period for the new vehicle is at least five years. Used cars do not qualify for the program.
The rules and fuel-mileage requirements are different for cars versus trucks. Even within the truck category, rules vary according to weight and whether the vehicle is four-wheel drive or not. It's all spelled out at the official Web site, CARS.gov.
Basically, to qualify for the program:
§ The vehicle must be less than 25 years old on the trade-in date
§ Only the purchase or lease (of at least five years) of new vehicles qualify
§ Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
§ Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in
§ No voucher is necessary; dealers will apply a credit at purchase
§ Consumers are eligible for any other advertised rebates or discounts in combination with the credit they receive through the CARS Program.
§ Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
§ The program requires the scrapping of the eligible trade-in vehicle, and that the dealer disclose an estimate of the scrap value of the trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.
The basic details of the program have been known for several weeks, but there were some surprises when the final rules were released.
For instance, the new guidelines require dealers to "permanently disable" the engine on trade-in vehicles before they are sent to a salvage yard, and NHTSA has very specific instructions on how to do that.
Dealers must drain the oil from the trade-in and replace the oil with at least two quarts of sodium silicate, a chemical typically referred to as "liquid glass." The dealer then starts the engine, and allows it to run until the sodium silicate heats up, binds to the internal parts of the engine like cement, and causes the engine to seize. NHTSA said it considered having dealers drill holes in the engine block or damage the threads on the oil filter but settled on the sodium silicate method.
Dealers will receive $50 to disable the engine, handle the transaction paperwork and ensure the vehicle is sent to a government-approved salvage yard. There are about 7,700 such yards nationwide. The entity crushing or shredding the vehicles in this manner will be allowed to sell some parts of the vehicle prior to crushing or shredding it, but these parts cannot include the engine or the drive train. Vehicles need to be shredded or crushed within six months.
The regulations also specify a civil fine of as much as $15,000 for those who violate the rules of the CARS program. Most violations would likely involve falsifying paperwork.