Be careful what you sign if you are taking advantage of the Car Allowance Rebate System (Cash for Clunkers). Bloomberg is reporting that dealers are asking buyers to sign a contingency agreement that would require the buyer to pay back the credit, of up to $4,500, if the dealer is unable to get the credit back from the government. In English – If the dealer can’t get the money back they want you to give it to them! In some cases the dealer isn’t getting their credit due to their own filing errors.
The dealers offer the buyer the opportunity to return their new car, only paying a small usage fee. Only problem is there’s a good chance that your clunker has already been destroyed leaving you without a car and without your credit!
In other cases dealers are waiting for their credits to come through before they allow the buyer to drive off with their new car. According to the official CARS site a dealer must let you take possession of a new vehicle if it is in stock. They cannot wait until the credit is processed by the government.
From the CARS.gov site:
Consumers should also watch that they are receiving all incentive deals that are advertised. Some dealers may be masking some offers with the Cash for Clunkers credit.
Here’s a suggestion:
- Research all incentive deals from the dealer and manufacturer before you go to the dealer.
- Research what the going rate for the vehicle and options you want in your area. Edmund’s is great to find that information.
- Negotiate the price of the new car first. Once you have that set THEN mention you intend trade in your clunker. This way you make sure you have the best price before the CARS credit comes into play.
It has been hard for some dealers to get their credits from the government. As a result it’s buyer beware when they enter the dealership. ALWAYS make sure you understand what you are signing.
photo credit: new1mproved
{ 16 comments… read them below or add one }
Thanks for this information! It is always important to be careful of what you sign. And, you are fast becoming the Cash for Clunkers expert I look to
.-= Miranda´s last blog ..Cardholders’ Bill of Rights: Who Complies? =-.
I pass on what info I get my hands on.
Wow – pretty ridiculous to see how these setups are even tolerated. Good grief! I guess from their side though, they’re trying to cover their a$$es too. Unfortunate, but good to know the data is out there!
.-= andy´s last blog ..Lake Manyara, Africa – January 2004 =-.
They are covering their rears but it could hurt consumers too! Buyers shouldn’t have to pay for dealer mistakes (which seems to be the case sometimes).
I can’t blame the dealers. The government has told them they have to be on the hook for $4500 AND have to allow the buyer to drive off in a car that may or may not get approved for the clunkers deal. It just doesn’t make good business sense to let someone drive off in a car where the final paperwork hasn’t been inked yet. I don’t know that it is so much the dealerships trying to be shady as it is the dealerships trying to stay in business.
.-= Kyle´s last blog ..8 Resources for Online Investors =-.
I can see that side of the equation and the gov’t needs to do something to make it easier for dealers to get their credit. But I can imagine a consumer haggling over the price, happy they are getting a new car, sitting in the finance managers office and they are slipped a paper they are told to sign that says they may have to pay back $4500. What are the odds most dealers are making sure the consumer fully understands that?
That’s very interesting! Most of the people I know have avoided participation in the program all together. As with most situations I side with the consumer. If you’ve bought a car before, you assume the contracts are all about the same and probably wouldn’t read all 5 gagillion pieces of paperwork you sign when purchasing a vehicle. Yes it is the responsibility of consumers to read all the fine print, but the dealers should have better customer service and be considerate enough to make sure people know what they are signing. How can you feel good about covering your own rear knowing you threw someone else under the bus to do it?
.-= Ashley ´s last blog ..Bad Poetry Contest: Credit Edition – $1000 Prize!! =-.
From car dealerships? I’m sure they throw people under the bus all the time!
Oh course they do! But as we’ve all learned with the current economy, the short term benefit of throwing someone else under the bus always fails short of the long term problems you’ll face for your actions at the end of the day.
.-= Ashley ´s last blog ..Bad Poetry Contest: Credit Edition – $1000 Prize!! =-.
On one hand, you can’t blame the dealers for including a contingency clause. They could lose some big bucks if the gov’t doesn’t come through on this for them. On the other hand, it would definitely bite to think you were getting a $4500 rebate and then later find out otherwise.
FFB – You may save a reader that is thinking about using Cash for Clunkers from a lot of grief with this post!
.-= Jeff@MySuperChargedLife´s last blog ..Kid’s Habits: Prepare Your Child For A Great Life =-.
I hope so!
Be very careful folks – now dealers are withdrawing from the program because they’re not confident that they’ll get reimbursed through the program. Many submissions are being denied for silly technicalities, and by many accounts only a small number of dealers have actually been reimbursed. I’ve heard anecdotal evidence of clauses like the one you mentioned being included – so be very careful what you sign!
.-= Peter´s last blog ..Five Things That Don’t Affect Your Credit Score =-.
Absolutely buyer beware!
So how many other people ran into the roadblock of not being able to produce a receipt for registration of the vehicle past the current? We drove an hour and a half to a small town north of Houston only to be turned away because we did not have 2007 receipt for our clunker. If you are as organized as I am, you throw the old receipt away when you get the new one. The tax collectors office said CARS did not bother to find out what they (TAX OFFICE) could provide. Our registration was renewed Dec 2008. I guess we were just screwed because we didn’t keep a receipt from 2 years ago. I was just wondering how many other people out there who fell in that same category?
A receipt? I haven’t heard that that is a requirement. Perhaps it’s just the dealer? I’d think having the registration and title would be enough.
Your car insurance will also skyrocket after you’ve dumped a clunker for a new vehicle.
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