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NHTSA on clunker scrappage amounts: Keep it

November 15, 2010

A lingering concern for dealers about the CARS program—apart for getting paid by the government—concerns disparities between what the dealers estimated their customers’ trade-ins worth to be and what they eventually fetched.

Many dealers thought they were entitled only to $50 from the scrap yard; anything over that would have to be returned to the customer. The CARS playbook does not address the issue directly.

Now, after the program essentially is closed, the National Highway Traffic Safety Administration has clarified that dealers can keep the difference.

If the dealership estimated a clunker was worth, say, $150 but it ultimately sold for $250, the dealer is not obligated to share any of it with the customer, saidNHTSA’s Dan Smith, who participated in most of the agency’s 10 Webinars on the CARS program.

"The $150 is a reasonable estimate that you swear to. If you get more, that doesn’t mean your estimate was not in good faith," Smith said.

"An auditor might ask, ‘What did you base the original estimate on?’ If you knew you were going to get $250, then you would have had to tell the customer that."