Friday, July 24, 2009

Transportation Department Provides Auto Dealers with Details on Cash-for-Clunkers Program

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) issued its final rules today for the Cash-for-Clunkers program as required by the Consumer Assistance to Recycle and Save Act of 2009 (CARS Act).

The program is designed to stimulate new car sales and to assist auto dealers who have been hit hard by the economic downturn, as well as the bankruptcies of Chrysler and General Motors.

Generally, the program enables consumers to receive a credit towards a new vehicle, with a manufacturer’s suggested retail price of $45,000 or less, when they trade in a vehicle from model year 1985 or later, with a combined fuel economy, as determined by the Environmental Protection Agency, of 18 miles per gallon or less. The program covers eligible transactions from July 1, 2009, through November 1, 2009.

Dealer’s Obligations Under Implementing Rules

The rules establish the process by which dealers may participate in the program. Dealers wishing to participate must register to do so electronically. The required registration data includes identifying information and the identity and contact information for a designated CARS contact person.

Once registered, a dealer that receives an eligible trade-in vehicle must submit an application for reimbursement to NHTSA. For each individual sale, dealers must submit dealer data, new vehicle purchaser data, trade-in vehicle data, and new vehicle data. In addition, dealers must provide information establishing that the trade-in vehicle is eligible under the program.

The dealer must also certify to the Secretary of Transportation, that the vehicle will be transferred to a facility that will crush the vehicle. The dealer is required to disable the vehicle’s engine prior to transferring the vehicle to the disposal facility and provide a certification to the agency that it has done so at the time the dealer submits its request for reimbursement.

One additional obligation imposed on dealers, not specifically stated in the CARS Act, is a requirement that a dealer obtain clear title to the trade-in vehicle. A dealer is prohibited from submitting an application for reimbursement until title to the trade-in vehicle, free of all liens and encumbrances, is transferred to it. The rules state procedures to follow in the few states that do not issue titles in transactions involving some older vehicles.

Civil Penalties

To deter fraud, the rules impose civil penalties for violations of the CARS Act. Each violation can result in a civil penalty of up to $15,000.

The agency has established a website, providing information about the program, including instructions on how to determine if a vehicle is an eligible trade-in vehicle, how to participate in the program, and how to determine if a dealer is participating in the program, at

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