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

Cash for clunkers: money, new cars running low

The "cash for clunkers" program may be a victim of its own success.

Reports this morning indicate the program may have to be suspended after a rush of sales depleted the program’s budget.

Yesterday, the National Automobile Dealers Association (NADA) released a survey of its dealers indicating more than 200,000 sales had been made since the program began. Based on initial data from the National Highway Traffic Safety Administration (NHTSA), which runs the program, the average credit consumers have received for their old clunkers so far is $4,215. Based on that amount, the government may already have spent $843 million of the $950 million allotted for the program. ($50 million of the $1 billion was allocated for administrative purposes.)

Today, NHTSA and the NADA are reviewing the program to determine whether to suspend it until all sales can be accounted for. In the mean time, the program will continue at least for today.

The Obama administration and some Congress members are looking for ways to extend funding for the program. Senators Diane Feinstein (D-CA) and Olympia Snowe (R-ME) have called for the program to be extended with higher mileage targets than before, which would effectively stretch out the program.

Meanwhile, the supply of eligible new cars on dealers lots is diminishing. The Toyota Prius now has a waiting list, and we have heard reports that Toyota RAV4s, Subaru Imprezas and Foresters, Volkswagen diesels and other high-mileage cars are in short supply.

So if you’ve been considering taking advantage of the clunkers program, we suggest you get down to your local car dealership today. But approach with caution and read the fine print. Should the program be halted soon, you need to make sure you are not commited to a purchase you would not want. Likewise, you want to make sure your junker isn’t deactivated before the credit is approved.

—Eric Evarts

For more information on the cash for clunkers program, see our guide. Also, check out our forum to share your buying experience.

Also read:
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

Chrysler PT Cruiser to keep on cruising

As anticipated, Chrysler formally announced today that the PT Cruiser will continue production despite previously being scheduled to be cut from the automaker’s lineup this summer. The convertible model, which was discontinued last year will not return.

It’s been nearly 10 years since the PT Cruiser hit the market. The initial popularity driven by its retro style and versatile packaging has waned over time. As of July 1st, the PT Cruiser had experienced a 74 percent sales decline comparing calendar-year-to-date for 2009 against 2008, notably more than all other Chrysler brand models except for the Sebring. However, the affordable hatchback provides the automaker with a relatively efficient model (compared to other Chrysler products) that aids its corporate fuel economy average.

In Consumer Reports tests, we found the PT to have a versatile interior, with a flat-folding front passenger seat and rear seats that can be removed to create a large open cargo area. Cabin access is easy. The Limited’s 2.4-liter turbo improves both on acceleration and fuel economy over the base non-turbo engine. However, poor visibility, a wide turning circle, and poor IIHS side crash tests even with standard side airbags are detractions. The PT also lacks modern safety equipment like stability control and curtain air bags; even anti-lock brakes are optional on lower trim levels. In the early years of the model, the PT Cruiser was a Consumer Reports’ recommended model, however poor reliability has changed its status.

The PT Cruiser will continue to be built in its Mexico plant, where keeping the line rolling may help in transitioning to building a future car there through cooperation with Fiat. No details have been announced yet on the 2010 PT Cruiser and pricing, however major changes are not likely.

—Liza Barth

Chrysler, GM’s favorability decreases, Ford goes up

It seems that Ford made a good move in the eyes of consumers by choosing to not accept the government bailout money. A new survey by Rasmussen Reports found that Americans hold a higher opinion of Ford, over Chrysler or GM, who received the government bailout and went through bankruptcy proceedings.

The national survey of 1,000 adults conducted at the end of July shows that 66% of Americans have a somewhat favorable view of Ford, while GM is viewed favorably by 38% and Chrysler 34%. Both GM and Chrysler’s scores went down 6 points from May and Ford’s numbers are generally unchanged. In contrast, 26% of respondents view Ford unfavorably compared to 56% for GM and 55% for Chrysler. Those numbers are up eight points for GM and three points for Chrysler.

The views may translate into what car brands consumers are buying as 46% say they are more likely to buy a car from Ford, who didn’t receive government assistance compared to only 17% for the post-bankruptcy GM.

The survey shows that the bankruptcies did take a toll on the public opinions of Chrysler and GM, but even with all the press, 82% say the Detroit 3 are somewhat important to the economy and 40% say they are very important.

For more information about the government bailout, see our Auto Crisis hub.

—Liza Barth

Cash for clunkers: Government stalls the CARS program

The Transportation Department has stalled the Car Allowance Rebate System (CARS) program, also known as cash for clunkers, as early as Friday due to a paperwork backlog, according to Reuters.

Although the money meter at cars.gov shows the fund tank is still more than ¾ full, with an estimated $779 million left for cars and light-trucks, it may not reflect all committed CARS vouchers. The suspension would allow for National Highway Traffic Safety Administration (NHTSA) to process existing CARS claims and more accurately report on remaining funds, according to USA Today.

The cash for clunkers program has been very effective in driving showroom traffic. There was always the question of how long the allocated $1 billion would last, and if it could stretch until November 1st. Current concerns within the government and auto industry suggest the money may not last nearly that long.

U.S. Senator Debbie Stabenow (D-MI) in a released statement indicated that more than 200,000 vehicles have been sold. Based on preliminary data, we estimate an average rebate value of $4,215 – with 28.5 percent of them valued at $3,500 and 71.5 percent valued at $4,500. This means more the two thirds of the junked vehicles are being replaced by significantly more fuel-efficient models, furthering the goal of greening the national fleet. It also means, the funds may be tapped out.

Legislators are discussing ways to extend the program, according to the Detroit News.

When or if the program will be reactivated or receive additional funding remain open questions. One thing is for sure, if opportunity knocks again, don’t delay.

—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: 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

Suzuki unveils Kizashi midsized sedan

Suzuki unveiled its new top-of-the line Kizashi midsized sedan, in Los Angeles today. The Kizashi will use a 2.4-liter, four-cylinder engine with variable valve timing, as well as balance-shafts for smoothness. It will be mated to a choice of a paddle-shifted CVT or a six-speed manual transmission. An electronically actuated all-wheel-drive system will be optional.

In size, the Kizashi is 183 inches long, with a 107-inch wheelbase, and 72 inches wide. That makes it about the size of the Hyundai Sonata.

Safety features will include standard electronic stability control and side-curtain air bags, along with optional rear side air bags. Suzuki claims the Kisashi meets all upcoming crash safety standards for 2014, including a side-into-pole crash test and a 50 mph rear offset test.

Uplevel trim lines will include a sunroof, heated leather seats, and a 10-speaker, 425-watt Rockford Fosgate stereo, and dual-zone climate control. Keyless entry and starting will be standard.

The company did not release pricing. When it goes on sale, we’ll put it to the test against other midsized sedans in its price range.

—Eric Evarts

Recalls: BMW, Honda, Subaru and Volkswagen vehicles

A few recalls have been announced recently that affect the BMW X5 and X6, Honda Accord and Civic, Subaru Baja, and Volkswagen Touareg models. If your vehicle is listed here, the manufacturer will contact you with information about what to do, or you can use one of the numbers we list below to contact the manufacturer yourself.

2009 BMW X5/X6
BMW is recalling all 2009 X5 and X6 vehicles because the rear brake discs may not have been made according to proper specs. The problem can result in reduced braking performance and larger stopping distances, which could increase the risk of a crash.

The manufacturer has not yet announced a remedy or notification schedule. Owners can contact BMW at 1-800-831-1117.

2001 Honda Accord and Civic
Honda is recalling all 2001 Accord and Civic vehicles due to a problem with the airbag inflator, which could produce excessive internal pressure and may cause it to rupture when deployed. Metal pieces could go through the airbag and cause injury.

Dealers will replace the airbag inflator free of charge. Owners can call Honda at 1-800-999-1009.

2005-2006 Subaru Baja
Subaru is recalling over 15,000 Baja pickups due to a cracking problem with the fuel hose connection on the outlet pressure side of the fuel pump. Fuel could leak from the hose connection and cause a fire.

Dealers will replace the fuel pump bracket free of charge. The recall is expected to begin in September. Owners may contact Subaru at 1-800-782-2783.

2007-2009 Volkswagen Touareg
Volkswagen is recalling over 14,000 Touareg SUVs due to a problem with fasteners on the roof edge spoiler. The struts could crack and possibly cause the spoiler to become loose and detach from the vehicle. This could result in a crash or injury to people outside the vehicle.

Dealers will install wedges to reinforce the spoiler to the roof free of charge. Owners may contact Volkswagen at 1-800-822-8987.

Cash for clunkers FAQ

Note:  The Cash for Clunkers program has ended as of August 24th, see the final results and sales numbers.

The government’s long-awaited cash for clunkers program is underway. So we’ve attempted to answer your questions about it here. Visit our complete cash for clunkers special section, where you’ll find more information about the program, guidance on vehicle choice, and buying advice.

What is Cash for Clunkers?
Now officially called the Car Allowance Rebate System (CARS), this government incentive program gives rebates to consumers who trade in older cars for new ones that are more fuel efficient. Used car purchases don’t qualify.

How does it work?
If you buy a new car now that gets at least 22 mpg overall, and trade in an old one that gets significantly worse gas mileage, the government will give you a $3,500 or $4,500 credit. (Specific guidelines are in the chart below.) The government-funded rebate is provided in lieu of a trade-in allowance. The old vehicle will be recycled, not resold. So if your old car is worth more money than the credit, it is not a good candidate for this program. The program is scheduled to run until November 1st, or until the allocated $1 billion is distributed.

How do I know which rebate I qualify for?
How much the rebate is worth depends on what type of car you trade in and what kind you buy. The program rewards a significant fuel economy improvement. However, if you’re buying a “light truck” such as a SUV or minivan, the mpg improvement doesn’t have to be as large.

	Passenger car light-duty	Small truck	Large light-duty truck (6,000 – 8,500 pounds)
Minimum fuel economy for a new vehicle (EPA  combined)	22 mpg	18 mpg	15 mpg
$3,500 credit	Mileage improvement of at least 4 mpg	Mileage improvement of at least 2 mpg	Mileage improvement of at least 1 mpg or trade-in of a work truck.*
$4,500 credit	Mileage improvement of at least 10 mpg	Mileage improvement of at least 5 mpg	Mileage improvement of at least 2 mpg

*Trade-in must be at least pre-2001.

Mileage ratings are based on official EPA combined estimates.

Do I have to register for the program?
No. Many dealer and third-party Web sites have sprung up asking consumers to unnecessarily register for the program. In many cases, they alert dealers that you may be thinking about buying a new car. For official information, the only place to look is www.cars.gov.

What qualifies?
If you have an old vehicle that gets 18 mpg or less and is less than 25 years old, you may qualify, depending on what kind of car or truck you are purchasing. The vehicle must be drivable, and you must be continuously insured and registered to the same owner for a full year prior to trading it in.

What happens to my old car?
Dealers have to certify that the old cars will be crushed or shredded in order for you to qualify. So they won’t be offering any additional trade-in allowance. All you’ll get for your car is what the rebate is worth. The vehicle itself may be parted out, with the exception of the engine and drivetrain.

What kind of car can I buy?
Used cars don’t qualify, but any new car that gets more than 22 mpg is eligible, or any SUV or truck that is EPA-rated at 18 mpg or more. Refer to the chart above to see the minimum mileage increase based on the vehicle type.

Can I lease?
Only leases of longer than five years qualify, so not many. But purchasing is always cheaper than leasing. And it’s a bummer to make five years of payments and not own the car.

Can I have an outstanding loan on my old car?
You could, but it would have to be paid off as part of the transaction. That would reduce the effective value of the rebate you receive or could result in that “negative equity” in your old car being rolled into the new car loan – not a good financial move. See our buying advice. 

Can I use the program at any dealership?
You can get a CARS rebate at any participating dealership. More than 22,000 dealership are participating, representing the vast majority. Won’t people scrap classic cars? Doubtful. True classics will be worth more than the credits, and the program is limited to the past 25 years, prior to antique status. Will the supply of parts for old cars be diminished? Old cars have to be sent to the junkyard and cannot be retitled. Parts can be sold off of them, but the engine block can’t, and the drivetrain cannot be sold intact. So the supply of engine blocks may be diminished, but other parts may actually be easier to obtain.

How much will the program cost?
Congress budgeted $1 billion for the program.

Will I be taxed on the rebate?
CARS rebates will be exempt from federal income taxes. However, state and local tax policy varies.

Will the CARS rebate substitute for other manufacturer or dealer rebates?
No, dealers aren’t allowed to reduce or hold back other rebates in exchange for CARS credits. This government-funded rebate is a substitute for the trade-in allowance you might otherwise get, not for any discount off the new-car price.

Will there be an additional paperwork fee for using the CARS rebate?
No, dealerships are not allowed to charge any extra fees for using the program. To cover administrative costs, dealers may keep up to $50 of the amount they receive for scrapping your old car vehicle.

What else do I need to know about the program?
Only one CARS rebate per person is allowed. You can’t get two rebates if you trade in two clunkers for two new cars. Also, only one rebate is allowed per trade in, even if two or more individuals own the vehicle. Sales tax on the purchase of your new car is tax-deductible on your federal income taxes. And you can combine any other federal, state, or local government incentives to buy a new car with a cash-for-clunkers rebate. The dealer is also required to tell you how much your old car is worth as scrap.

When does the program end?
The new cash for clunkers law runs from now until October, 31, or until the $1 billion budgeted for the program runs out. Congress could choose to extend it if the money isn’t spent by then, or it could decide to allocate more money to the program.

Visit our Cash for Clunkers special section for more details. To get advice on whether it is the right time to buy a new car, see our post Is Cash for Clunkers for you? Visit our New car buying and leasing forum to share your experience and give advice to others making the trade.

Also read:
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

Pet Peeve: OdoClub encourages driving and dealer loyalty

Most press releases that float over the transom sail quietly into the digital trash can, but one announcing the launch of OdoClub got my attention. And irked me.

The basic premise for OdoClub is to apply the frequent flyer business model to car ownership. By driving, club members accumulate points that can be redeemed at participating dealerships. This will breed loyalty to the dealers and ensure continuous two-way communication between the dealers and customers. Not a bad idea, really.

However, the concept of encouraging people to drive more goes against the greening of transportation. Ill timed, this business and marketing message flies in the face of the cash for clunkers (CARS) program, where the government and auto industry are encouraging gas guzzlers to be traded in for more fuel-efficient models – at significant taxpayer expense – in order to stimulate the economy (including local dealerships), reduce our national dependence on fossil fuels, and reduce emissions.

So, while the nation takes a bold step to green the national fleet, with an eye to increasingly stringent fuel economy standards over the next few years and advancing green technology, here is a club dedicated to encouraging driving? More miles, more points. Drive, baby, drive.

It could be said that this just rewards people for what they do anyway. It could also be said that selling beer at drive-through concessions would be convenient, or an on-the-go texting program to provide discounts for multitasking motorists would cut cell phone bills.

Clever idea. Wrong time. No thanks.

—Jeff Bartlett

How distracted a driver are you?

If you use a cell phone for calls or texting while driving, chances are you are dangerously distracted. Studies and statistics that have emerged this month may be enough to encourage many drivers to swear off multitasking from behind the wheel. And if not, a clever “game” from The New York Times can provide a further wake-up call.

The interactive feature can assess your reaction time while responding to a series of text messages and thereby illustrate the impact of distractions—all from the safety of your desk chair. Give it a try, and you’ll see how easy it is to be distracted by the messages and miss important signs.

However, please note that no matter how well you do, texting while driving is extremely dangerous and should be avoided. In fact, strongly consider turning off the device when behind the wheel to remove the temptation to respond to incoming messages.

The New York Times recently broke a story on a 250-page report from National Highway Traffic Safety Administration (NHTSA) detailing the cell-phone risks to motorists, and they are severe whether using a hands-free or handheld phone. This week we reported on a Virginia Tech Transportation Institute study that found texting while driving has the highest crash risk of all cell phone related tasks—23 times riskier than using a cell phone. Any way you approach it, cell phones and driving make for a dangerous combination.

The conclusion remains: Hang up and drive.

—Liza Barth

For more information on distracted driving see our related reports:
Using wireless communication devices while driving
Cell phone use and driving laws
Dangers of cell phones while driving
Should cell phone use by drivers be illegal?
Texting while driving
Talking in the slow lane