Eight Ways To Get Screwed By Cash For Clunkers

Earlier this month we brought you a list of five ways to get screwed the Cash For Clunkers bill. A lot has happened in a month and we now we've got three more ways to get screwed.


8.) Buy A Clunker Now!
Some unscrupulous sellers may try and convince you to buy a clunker for a few hundred dollars with the promise of being able to trade it in for a $4,500 voucher. In reality, if you haven't owned your car and kept it running and insured for a year you're not eligible. Don't buy a beater unless you want to keep it for a while.

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7.) Let Them Destroy Your Car Early
Dealers are required to, at some point, destroy the engine of your trade-in using a special chemical compound. Don't let this happen until after all the paper work is signed and you have your car or you will end up with a suitcase, essentially, if something goes wrong and you can't, or don't want, to buy the car.

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6.) Scrap A Car Worth More Than The Voucher
Not all of the cars that qualify are truly clunkers. Make sure to check the value of your car using a resource like KBB before trading in an older car that, it turns out, is worth more than $4,500 or $3,500 on the open market. Dealers have a greater incentive to sell you a new car and scrap your old one than to get the value of your trade-in "clunker."

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5.) Get Denied For Other Discounts
The voucher program is not designed to be a stand-alone discount program, meaning you're still eligible for whatever other discounts automakers are offering (and there are a lot of those). With 0% financing and thousands cash back you're getting cheated if you just get the value of your trade-in off a new car. The average incentive, according to Edmunds, was $2,930 for June. So you could possibly get $4,500 + $3,000 off of a new car.

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4.) Avoid Moving Up To A More Profitable Class
If you own a truck or SUV you can use your voucher to trade it in for a car and, likely, get a larger voucher. Many dealerships will want to put you into a new truck because they're more expensive than most cars, but if you don't need a truck you can trade your old one in and find an inexpensive car with 10 MPG better fuel economy, which qualifies you for $4,500. For example, if you've got a 1991 six-cylinder Ford F-150 you can trade it in for a $15,000 2009 Ford Focus for your kid and get the full $4,500 off, instead of paying upwards of $20,000 for a new truck and only getting a $3,500 voucher.



3.) Own A Car That Was "Refreshed"
It turns out more than a few consumers went into the dealership on Thursday to setup a Cash For Clunkers trade only to find out their cars no longer qualified. If your car is hovering around 18-to-19 MPG range you should go back to FuelEconomy.gov to make sure it still does qualify.


2.) Lose Your Proof Of Insurance
You can't access the CARS rebate unless you prove you've had the car continually insured for a year or more. How do you prove that? Here are the best three ways:

  • One or more insurance cards containing the make, model, model year and vehicle identification number of the insured trade-in vehicle
  • Insurance policy documents showing one year's previous coverage
  • A signed letter on insurance company letterhead identifying the vehicle and the period of continuous coverage.

1.) Pay The Sales Tax On The Pre-CARS Value
Reader Randy Semel bought a Honda Accord Coupe after trading in an old Dodge Caravan and received the $3,500 rebate. Unfortunately, he was charged the sales tax for the pre-rebate amount. The NHTSA rule says this: "The use of the term "rebate" in the name NHTSA has chosen for the program is not intended to have any effect on how CARS transactions are treated under State or federal tax laws. The CARS Act provides that the credit is not income to the purchaser, but does not address any other possible tax issues." We read this to mean that, while it's up to taxing authorities to determine how sales taxes are enforced, the intention is for this value not to be taxed. You'll have to work it out with your individual dealer but you're better off instructing them not to include the pre-CARS amount as the taxable value.


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