The re-instatement of the federal government’s “Cash for Clunkers” program today comes with some cautions and advice for new vehicle purchasers, according to AAA Carolinas.
“As in many discount programs, consumer knowledge is key to getting the best possible deal,” said David E. Parsons, CEO and president of AAA Carolinas.
“There are some reported practices buyers should be wary of and some financial analysis that needs to be done to ensure the buying decision is a good one.”
The program has been extended through Nov. 1 with an additional $2 billion in federal funds as part of an economic stimulus package.
Some cautions
– Dealers in some states have allegedly required buyers to sign a statement that the buyer would have to pay the $3,500 to $4,500 rebate if the federal government did not pay the dealer. No buyer should sign such a statement. The dealer is responsible for making sure the purchase qualifies and the government pays.
– Some buyers have traded in used vehicles worth more than the $3,500 to $4,500 rebate. Check your vehicle’s trade-in value before going to the dealer. If your vehicle is worth more than the rebate, sell it separately. The value of a new car purchase under the program may not be as financially advantageous as buying a late model used car. Do the math.
Advice
– A vehicle that does not run, hasn’t been insured for a year and hasn’t been owned by the seller for a year, does not qualify for the rebate program. Program rules can be found on cars.gov.
– Evaluate what the insurance coverage will cost for your new vehicle, since it will definitely increase over the insurance on your 1984 or newer vehicle.
– Old mileage estimates by the Environmental Protection Agency (EPA) are not valid. You can find your vehicles’ new mpg rating on FuelEconomy.gov, updated by EPA last month. Cars must get 18 combined (city and highway) miles per gallon or less.
– New cars and minivans must get a combined 22-mpg or more to be eligible. Light duty trucks (such as pickups) and sport utility vehicles weighing less than 6,000 pounds must get 18 combined mpg or more.
– The rebate can be combined with other sales incentives, like federal tax programs concerning hybrid vehicles. The rebate is not taxable to the individual or dealer by the federal government.
– Leases of five years or more are eligible for the rebate as long as all other requirements are met.
The Cash-for-Clunkers extension runs through Nov. 1 or whenever the additional $2 billion appropriation is spent. Many automotive experts feel the first enactment was used by those ready to buy a new vehicle. Estimates vary widely on how many will take advantage of the extension.