Cash For Clunkers Program - Dealer FAQ

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Questions and answers for dealers about the Car Allowance Rebate System (CARS) also known as the Cash for Clunkers program.

What is the Car Allowance Rebate System?

The CAR Allowance Rebate System (CARS) is a $1 billion government program that helps consumers buy or lease a more environmentally-friendly vehicle from a participating dealer when they trade in a less fuel-efficient car or truck. The program is designed to energize the economy; boost auto sales and put safer, cleaner and more fuel-efficient vehicles on the nation's roadways.

Consumers will be able to take advantage of this program and receive a $3,500 or $4,500 discount from the car dealer when they trade in their old vehicle and purchase or lease a new one. Consumers do not need to register anywhere or at anytime for this program.

Important Information Dealers Should Know

  • All dealers identified by their OEM as an authorized dealer will receive a letter with instructions on how to complete the registration process. To find out how to register, visit: www.cars.gov/dealer/how.
  • Transactions on and after July 1 are potentially eligible for credits.
  • Rebates are limited to transactions between July 1, 2009, and November 1, 2009, OR when the funds are exhausted - even if that occurs before November 1.
  • Each transaction you submit will require accurate supporting documentation to ensure timely reimbursement. Errors and omissions will result in rejection and a resubmission of the transaction with corrected documentation.
  • NHTSA will provide you with guidance on how to process the transaction, checklist for accurately completing the transaction and examples of mistakes to avoid.

Questions and Answers for Dealers

The following questions and answers are based on the provisions of the Consumer Assistance to Recycle and Save Act of 2009. For more information, visit the C.A.R.S. website, or call the CARS Hotline at (866)-CAR-7891 or TTY at (800)-424-9153.

What are the different categories of eligible vehicles?

The CARS Act divides the eligible vehicles into four groups: passenger automobiles; category 1 trucks; category 2 trucks; and category 3 trucks. NHTSA will soon publish a list of the vehicles that fall into these groups. For the present, we describe here the statutory definitions, give examples of types of vehicles that satisfy those definitions, and refer readers to the large table at the end of this notice.

The term "passenger automobile" and its definition are borrowed from the fuel economy statute. The definition excludes from that term (1) vehicles that NHTSA has determined are not manufactured primarily for transporting persons and (2) vehicles that are capable of off-highway operation. Vehicles not manufactured primarily for transporting persons include pickup trucks and certain vehicles that permit expanded use of the vehicle for cargo-carrying purposes. See 49 CFR 523.5(a). Under NHTSA's regulations (49 CFR 523.5(b)), there are two groups of vehicles with capability of off-highway operation. The first includes vehicles that have 4-wheel drive and have at least four out of five specified physical characteristics relating to ground clearance. The second includes vehicles that are rated at more than 6,000 pounds gross vehicle weight and have at least four out of five specified physical characteristics relating to ground clearance, but do not have 4-wheel drive. Passenger automobiles are what are commonly known as passenger cars.

A category 1 truck is a nonpassenger automobile. This category includes sport utility vehicles (SUVs), small and medium pickup trucks and small and medium passenger and cargo vans.

A category 2 truck is a large van or a large pickup truck, based upon the length of the wheelbase (more than 115 inches for pickup trucks and more than 124 inches for vans). Note: some pickup trucks and cargo vans exceeding these thresholds are treated as category 3 trucks instead of category 2 trucks.

A category 3 truck is a work truck and is rated between 8,500 and 10,000 pounds gross vehicle weight. This category includes very large pickup trucks (those with cargo beds 72 inches or more in length) and very large cargo vans.

How will dealers know if cars or trucks are eligible trade-in vehicles?

There are several requirements.

In general, the trade-in vehicle must

  • have been manufactured less than 25 years before the date of the trade 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 truck, must also have been manufactured not later than model year 2001

Where can dealers find the combined city/highway fuel economy ratings for trade-in vehicles?

Click on Fuel Economy along the top navigation of this page. Enter the model year of the vehicle, the make, and then the model. Under the words "ESTIMATED NEW EPA MPG" in the red banner, there is a red number with the word "COMBINED" under it. That is the new combined city/highway fuel economy for that vehicle.

Are trucks included in the CARS program? Some trucks don't have fuel economy ratings.

Maybe. Some trucks, such as work trucks, were never rated for fuel economy. For these trucks, age is the only criterion for determining whether they are eligible trade-in vehicles. If a consumer has one of these trucks, it must be from model year 2001 or earlier, but also the date of manufacture must be less than 25 years from the date the trade-in date, to be an eligible trade-in vehicle. Other restrictions may also apply.

What rules apply to new work trucks?

A work truck, which is called a category 3 truck under the CARS Act, is subject to special rules. Work trucks are not rated for fuel economy by the EPA. Thus, the eligibility of work trucks for the program does not depend on combined fuel economy. Instead, work trucks may only be traded in under the program if they were manufactured not later than model year 2001 and not earlier than 25 years before the date of the trade in. In addition, work trucks may only be traded in for the purchase of a category 2 truck or another category 3 truck that is of similar size or smaller than the traded-in vehicle. Finally, the Act provides only for a $3,500 credit for trading in a work truck.

The CARS Act limits the amount of funds that can be used to provide credits for purchases or leases of work trucks. Only 7.5 percent of the funds appropriated for the program may be used for credits for work trucks. Once that limit is reached, NHTSA will stop making payments for these transactions. NHTSA will keep the public informed as to the funds that remain available for these credits.

What is the value of the credit for the purchase or lease of a new passenger car?

The value of the credit for the purchase or lease of a new passenger car depends upon the difference between the combined fuel economy of the vehicle that is traded in and that of the new vehicle that is purchased or leased. If the new vehicle has a combined fuel economy that is at least 4, but less than 10, miles per gallon higher than the traded-in vehicle, the credit is $3,500. If the new vehicle has a combined fuel economy value that is at least 10 miles per gallon higher than the traded-in vehicle, the credit is $4,500.

What is the value of the credit for the purchase or lease of a new van, pickup truck or SUV?

The value of the credit given for the purchase or lease of a category 1 or 2 truck also generally depends on the difference between the combined fuel economy of the vehicle that is traded in and that of the new vehicle that is purchased or leased. If the new vehicle is a category 1 truck that has a combined fuel economy value that is at least 2, but less than 5, miles per gallon higher than the traded-in vehicle, the credit is $3,500. If the new category 1 truck has a combined fuel economy value that is at least 5 miles per gallon higher than the traded-in vehicle, the credit is $4,500.

If both the new vehicle and the traded-in vehicle are category 2 trucks and the combined fuel economy value of the new vehicle is at least 1, but less than 2, miles per gallon higher than the combined fuel economy value of the traded in vehicle, the credit is $3,500. If both the new vehicle and the traded-in vehicle are category 2 trucks and the combined fuel economy of the new vehicle is at least 2 miles per gallon higher than that of the traded-in vehicle, the credit is $4,500. A $3,500 credit applies to the purchase or lease of a category 2 truck if the trade-in vehicle is a category 3 (work) truck that was manufactured not later than model year 2001, but not earlier than 25 years before the date of the trade in.

May dealers use the credit in combination with manufacturer rebates or discounts?

The CARS Act requires dealers to use the credit under the CARS program in addition to any rebates or discounts advertised by the dealer or offered by the new vehicle's manufacturer. You may not use the credit to offset these rebates and discounts.

Can dealers charge a fee for selling or leasing a vehicle under the CARS program?

No. While dealers can charge normal types of fees, the CARS Act specifically prohibits you from charging a fee for selling or leasing a vehicle under the program.

Is there a cap on the price of the vehicle a dealer can sell or lease under the program?

Yes. The base MSRP or price on the Monroney Label affixed to the vehicle before any dealer accessories, optional equipment, taxes, or destination charges, cannot exceed $45,000.

Does the program apply if a dealer wants to sell a used car?

No. The program does not apply to the purchase of used vehicles.

Does the program apply to vehicle leases?

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.

Is this program only for American cars?

No. Consumers may trade in or buy a domestic or a foreign vehicle.

Can a dealer resell the traded-in vehicle?

The CARS Act requires that the trade-in vehicle be crushed or shredded so that it will not be resold for use in the United States or elsewhere as an automobile. 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.

Will consumers need to get a voucher or sign up for this program?

No. Consumers do not need a voucher and are not required to sign up or enroll in this program. If you are a participating new car dealer, you will apply a credit, reducing the price of the new vehicle at the time of purchase or lease, provided the vehicle you sell or lease and the vehicle traded in meet the program requirements. You will then obtain reimbursement from the government.

Are consumers allowed to receive or use more than one credit under the CARS program?

No. The CARS Act specifies that not more than one credit may be issued to a single person, not more than one credit may be issued for joint registered owners of a single eligible trade-in vehicle, and that only one credit under this program may be applied toward the purchase or lease of any single new vehicle.

In addition to the credit, do consumers expect full trade-in value for their vehicle?

No. The law requires the trade-in vehicle to be destroyed. The law requires you to disclose to the consumer an estimate of the scrap value of their trade-in vehicle.

Do consumers have to pay state or local sales tax on the amount of the CARS program credit?

The question of whether a consumer must pay State or local sales tax on the amount of the CARS program credit would depend on the sales tax law of each State or locality. Dealers should review the law of their respective States or consult a tax advisor to answer this question.

Can this credit be combined with other government incentives?

Yes. Consumers can combine this with other State and Federal incentives, such as the hybrid vehicle credit. For information on this credit, refer consumers to www.fueleconomy.gov/Feg/tax_hybrid.shtml

Related articles

Source: www.cars.gov
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