Cash for clunkers: CARS program sputters, what should car shoppers do?

The Car Allowance Rebate System (CARS) program is stuck in gridlock. So much showroom traffic over the past few days has created a paper jam that limits the ability to accurately calculate how many credits have been promised, and therefore estimate how much of the allocated funds remain. News reports over the past 18 hours have vacillated between the program being put on hold and continuing. (Read: “Government stalls the CARS program.”)

The House of Representatives has voted to continue the program with another $2 billion in funding. Even if the money is approved, there may be an interruption. If you’re a car shopper eligible to take advantage of this program, it can be difficult to know what to do right now.

Update: NHTSA has said the CARS program will continue, so it is in effect this weekend. It is still not known how long it will last.

Some things to consider

If you are still interested in pursuing a cash-for-clunkers credit on a new, more fuel-efficient vehicle, approach with caution. There is a risk that the credit may not be available by the time you complete the paperwork. Funding approval might also bring changes in the rules, so you need to protect yourself.

Don’t agree to a purchase without reading the small print. It is important to avoid commitment to a purchase without knowing if you will receive the credit.

Don’t give a dealer a check for the $4,500, just in case the credit isn’t available - that protects the dealer at your peril.

Should you sign an intent-to-purchase agreement, don’t drive off in a new car. Once you drive away, it can be very difficult to return the new car. Likewise, don’t leave the clunker behind. It would be a shame if you wanted the car returned and the engine had been killed, as the program requires.

In pursuing cash for clunkers, make sure you’re getting a good deal on the new car. Negotiate the purchase price as you would any other time, using the Bottom Line Price that factors hidden dealer incentives and holdback. If the dealership won’t work with you on the price, shop elsewhere or consider another brand or model. 

When shopping 2009 models, there should be a significant discount, either through straight negotiation or in combination with customer rebates. After all, these models will depreciate a full year’s worth in a matter of weeks as the 2010 models arrive.

Dealers are running out of stock on many of the most popular new models that qualify for the rebate. You may need to work harder than usual to find just the right model, trim, and color combination you desire.

Since you presumably held on to the last vehicle for an extended period, therefore letting its value drop beneath $4,500, consider reliability as a key factor in choosing your next vehicle.

Dealers are hungry for profits now more than ever. Make sure you’re attentive through the buying process. Otherwise, you risk losing the negotiated savings in the finance office from a poor interest rate or add-on services like extended warranties that can sour the overall deal.

This is all a bit confusing at the moment, but don't fret. It looks promising for the program to continue. Even if it doesn't, it may be possible to get a better deal after the cash-for-clunkers program ends. You may save as much on the new car as the difference between the value of your trade in and the CARS rebate.

For more tips, read: "Cash for clunkers: Is it right for you?" and our new-car buying advice.

—Jeff Bartlett

For more information on trading in your clunker for a more fuel-efficient car see our cash for clunkers guide. Also, check out our forum to share your buying experience and give advice to others looking to make the trade.

Also read:
Cash for clunkers: money, new cars running low
Cash for clunkers: Recommended cars that qualify for a voucher
Cash for clunkers: The best gas guzzlers to junk
Cash for clunkers: Compare the fuel savings
Cash for clunkers: Fuel and owner costs
Cash for clunkers bill cuts fuel consumption–running the numbers

Comments

[Concerned]

I'm not sure what kind of dealerships are requiring these kinds of sign offs. I will tell you this, the dealership that I work for is taking the responsibility on these deals. I don't know what dealership would ask a consumer for money back AFTER they've destroyed their car. A dealership can't even try to collect until after they have a certificate of destruction.

[RM]

Typical government program... cash-for-clunkers is already costing THREE TIMES it's original estimate. Imagine the DISASTER if these politicians attempt healthcare reform.

[Derrick G]

While Concerned's comment was correct at the time he made it, later that day NHTSA announced that it had issued new rules that no longer require the engine to be disabled before a request for the CARS rebate is made. However, it must be done before the car leaves property owned or controlled by the dealer.

[tom cordoni]

I just purchased a new 2008 Chrysler sebring which included a $3500 discount on the price. I then only received $3000 in matching customer incentive funds??? I called Chrysler and got disconnected.I left a message and they have not returned my call 5 days. I did get a GREAT DEAL ON THE AUTO. Should I have gotten $3500???? from matching funds?
Tom.