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New information on recent CARS investigations by the NHTSA

November 15, 2010

The National Highway Traffic Safety Administration has contacted via mail some dealers who participated in last year’s Car Allowance Rebate System, also known as "Cash for Clunkers," because the agency identified one or more allegedly invalid CARS transactions.

The letters typically request that the dealer review and examine the transaction and, if confirmed to be in error, to refund to the government the $3,500 or $4,500 incentive amount. The letters also request that all CARS invoices the dealer submitted be reviewed for accuracy. Compliance failures, the letters state, could result in penalties of up to $15,000 per violation.

Following a discussion with the NHTSA staff, NADA representatives concluded the following:

• NHTSA’s recent CARS investigations include some dealers but primarily are focused on auto recycling and dismantling companies.

• The NHTSA is concerned about less than 1 percent of all invoices submitted and intended to complete the mailing of audit letters by the end of September 2010.

• Many audit letters involve fuel economy disparities with the Ford Taurus and Chevrolet Malibu. Apparently, dealers did not always accurately identify the new vehicle’s engine and/or transmission configuration. Using a VIN decoder, the NHTSA identified trade-in/new-vehicle pairs where there was no minimum amount of fuel economy increase.

• The NHTSA has advised that dealers do not have to audit all transactions, clarifying that dealers should focus on those CARS invoices involving vehicles similar to what was specifically identified in the letter.

• At the NADA’s request, the NHTSA developed a PowerPoint presentation for use by dealers who must respond to a CARS audit letter. The presentation is under Latest News on the home page of