Feds: Most Cash For Clunkers Dealerships Followed The Rules

August 24, 2010
Cash for Clunkers banner with Mercury Sable, Albany, New York

Cash for Clunkers banner with Mercury Sable, Albany, New York

It seems that some Cash for Clunkers vehicles—and paperwork—have gone missing.

We knew it would happen. With hundreds of thousands of vehicles taken on trade—some in good shape and worth potentially more than their $4,500 rebate value—it’s no surprise that a few, somewhere, didn’t end up in the crusher as they were supposed to.

Now, a year after the government’s Cash for Clunkers program (or CARS, Car Allowance Rebate System) concluded, the feds are checking up on the paperwork and cracking down on those who let more than a few details slip.

And it’s not nearly as bad as it could be. According to the U.S. Department of Transportation’s Inspector General’s Office, in a report, about 3.3 percent of claims—roughly 22,000 transactions, for rebates totaling nearly $94 million—were missing key paperwork. In addition, seven of the 22 junkyards (or salvage yards, or recyclers depending on the terminology of your choice) hadn’t submitted information about destroyed vehicles to the federal NMVTIS vehicle-title database.

The U.S. government has information that, allegedly, up to two dozen vehicles had been exported. It’s quite possible that the real total is many times that, but only the black market can say.

The program allowed those trading in older, less fuel-efficient vehicles a $3,500 or $4,500 federal rebate toward a more fuel-efficient vehicle. More than 678,000 buyers took advantage of the program, through 18,915 dealers across the nation. As part of the deal, the dealerships were required to provide specific proof that the vehicles had been scrapped.

During 2009, the number of vehicles scrapped in the U.S. exceeded the number of new vehicles sold for the first time in decades.

scrap heap

scrap heap

There were widespread reports of Clunkers vehicles stacking up. And there were other stories, such as that of the Southern California couple who traded in their inefficient 2001 Nissan Xterra for a car that they wouldn’t have otherwise purchased, then found their Xterra back on the used-car lot shortly thereafter.

Not everyone will agree on what the lasting results of the program are, but most do concede that it gave the market a burst of much-needed showroom traffic at a time when sales had ground to a hlt. Some analyses of the program at the time predicted that the federal government was merely mortgaging future auto sales that would have otherwise occurred—and Edmunds.com claimed that each CARS vehicle sold cost taxpayers $24,000—but a Maritz Research survey, released in March, found that a large number of vehicles sold at that time (more than 200,000) were to “halo buyers” who wanted to participate in the program but couldn’t qualify.

Earlier this month we reported an unusually high percentage of those who took advantage of a lease are looking for an early exit. Less than 20 percent of Cash for Clunkers transactions were leases.

So far, the feds have only collected fines totaling $71,500 from nine dealerships

[USA Today]

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