CARS or Cash For Clunkers Means Some Win, Some Lose

Ford Motor Co. said it would ramp up automobile production by 150,000 U.S. cars this year.  Sales have surged due to the U.S. “Cash for Clunkers” program. This is the popular name for the Cars Allowance Rebate System (CARS) program.

The rebate allows car buyers to receive up to $4,500 from the government toward the purchase of a qualifying new vehicle when trading in an older model that gets 18 miles per gallon or less.

Who’s Cashing in on All Those Clunkers?  According to the Compete blog, the cash for clunkers program boosted online attention from new vehicle prospects, both in terms of unique visitors to the cars.gov site and to OEM sites. That attention, combined with attractive incentives to junk an old gas guzzler and replace it with a newer, more fuel efficient model contributed to a July sales surge of more than 15% month-over-month.

Not everyone was happy.  According to watchdog groups, some ‘clunkers’ dealers were requiring payback agreements. The government website is very clear that Consumers Are Not Required To Sign Contingency Agreements To Pay Back The Dealer Should The Cars Credit Be Rejected.  Some dealers were also asking consumers to keep their “clunker” until the deal was approved by NHTSA.

Another unfortunate consequence of all this is that ‘Cash for clunkers’ is hurting charities.  Some charities rely on car donations to raise funds.  Instead people who would normally donate their car are now turning them in to dealerships.  While those who donate vehicles to charity receive a tax deduction for the price the car sells for at auction — typically $500 to $900 — the CARS program offers a $3,500 or $4,500 rebate for trading in a used vehicle.  That’s a very tough choice if you would really prefer to support your charity.

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