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Dealers should wait for final 'clunker' ruules

November 15, 2010

The so-called "cash for clunkers" legislation became law June 24, but the federal government was permitted another 30 days to finalize its rules. It appears the feds will use all those 30 days.

Dealers understandably are eager to negotiate the sale or lease of a new vehicle to someone with a "clunker" that could net the customer a $3,500 or $4,500 trade-in allowance. But the CATA strongly cautions dealers from attempting any such transaction until the U.S. Department of Transportation finalizes the program rules before a July 24 deadline.

Dealers could be fined $15,000 for each sale that violates the rules, the National Highway Traffic Safety Administration has warned.

"If a dealer chooses to structure a transaction before the final rule is issued, he will bear the risks associated with later demonstrating that the transaction meets all of the specifications of the final rule," a NHTSA spokesman said.

Details still being ironed out include how to: 

• Register dealers to participate in the program;  
• Reimburse dealers who participate in the program;
• Require that dealers use the credit as an addition to, instead of as a substitute for, other rebates and discounts advertised by the dealer or offered by the manufacturer; 
• Require that dealers disclose to the person trading in an eligible vehicle the best estimate of the scrappage value of such vehicle and authorize dealers to retain $50 of the amount paid for the scrappage value as payment for the administrative costs of the program (Any remaining scrappage fees would be subject to negotiation be¬tween the dealer and purchaser.); 
• Establish, in consultation with the Environmental Protection Agency, requirements and procedures for the disposal of eligible trade-in vehicles; and 
• Provide for a means to enforce penalties for violations of the program requirements.

For additional details on the program, visit the Transportation Department’s Web site,, or call its cash-for-clunkers hotline at (866) 227-7891. Operators are available 7 a.m.-9 p.m. CDT weekdays and 9 a.m.-7 p.m. CDT Saturdays.

The Illinois Revenue Department ruled June 30 that it would recognize the voucher amount as a trade-in credit, meaning a dealer could reduce the transaction price by that amount before calculating sales tax.

Brian Pasch, an online marketing specialist, has been fielding hundreds of phone calls and emails from customers seeking information about how to take advantage of the clunkers program. He sees a train wreck, with dealers shouldering the blame for an overly complex and very confusing set of regulations.

Pasch said some inquirers become angry over the 18 miles-per-gallon benchmark. Many indicate that their actual mileage is much lower than the EPA ratings for their vehicle. Often when this happens, they want to argue. Pasch said dealers should make sure the customer realizes that the dealership is not the originator of the guide.

He suggests that dealers "frame" the government’s fuel economy calculation page into the dealership’s Web site. (Framing is the Web’s art of bringing another site on to yours — in this case so that the origin of the data is clear to the viewer.)

"By framing the calculation page onto the dealership’s Web site, you can offer the necessary qualifying data right on your Web site (while also keeping the prospect on your site longer, creating a better opportunity for them to click through to a sales inquiry form or e-mail). All this can be accomplished while still clearly communicating that this is the government’s data and not a creation of the dealership," Pasch said.

He said dealers and salespeople should discuss which consumer questions they should be prepared to answer and which questions they should defer to the government’s Web site.