On Friday July 24, 2009 the NHTSA published the “Final Rule“  for the Car Allowance Rebate System (CARS) program that was created by the Cash for Clunkers bill.   In this 136 page document a number of issues were clarified and at least one new procedure added.  Some dealer and consumer concerns remain unanswered.

According to the document, auto dealers will be required to play “Executioner” and sign-off that they made the  engine inoperable or was made inoperable by a CARS registered salvage facility.  The Final Rule document starting on Page 40 outlines how dealers can use sodium silicate to make an engine inoperable.

Dealers are to drain a few quarts of oil from the car engine  and add the sodium silicate solution, best described as liquid glass, in the oil plan.  The dealer is then required to run the engine and the glass solution will render the engine inoperable. 

Here is the catch: The dealer has to perform the execution before they submit all paperwork to the NHTSA for reimbursement.

The NHTSA Final Rule document on Page 122 provides a form entitled “Summary of Sale/Lease & Certifications Form” which dealers must complete and sign.  On this form the dealers have to testify that the engine has been made inoperable or that the car has been crushed.  The wording is clearly past tense implying a fully completed action.

Russian Roulette

The unwilling game of Russian Roulette starts when the dealer, doing their best to follow the rules of the program, submits a transaction that is not approved by the NHTSA.  If the compliance concerns of the NHTSA are not resolved, the customer’s collateral is now destroyed and unable to be returned in pre- trade-in condition. 

For some trades, the clunkers still have a street value of thousands of dollars.    Would this mean that dealers who have to back out a Cash for Clunkers deal are on the hook for any mistakes, errors and omissions?  It surely looks that way. 

These rules  should give dealers  strong motivation to create error free compliance measures which may require consumers to sign a waiver of liability if the NHTSA rejects the trade.  But as careful as they may be, errors will be made but in the current system, reversing the car deal will be complicated.

A Moving Target

The matters get even more complicated as consumers have written into www.cashforclunkersfacts.com and have stated that the MPG numbers of the Federal website have changed for some models over the past month.  We have no way of confirming that the Federal website has changed car data but enough consumers have reported such activity that it makes us concerned for the liability that car dealers may face.

What happens to dealers that took in trades starting July 1st and now find that the http://fueleconomy.gov website has changed the number to make the trade not a candidate for CARS rebates.

The Cash for Clunkers program seems to create large risks for car dealers.  Some industry veterans we have spoken to say that many transactions will be made that don’t fully comply.  This could be a financial  disaster foe car dealers with sloppy bookkeeping procedures.

Using the Wrong Data

A consumer reported to us today that their local dealer was using www.Edmunds.com  to evaluate the MPG ratings for his trade.  According to the consumer, the  data shown on the Edmunds site was incomplete.  Here is what this frustrated consumer had to say:

“Also note that the experience was horrid from the start.  The main reason for this was the dealership said my car did not qualify.  They were using a list that Edmunds.com produced.  Which was incomplete!!  I spent an hour convincing them that basing their information off a non-government site was ludicrous and that they need to follow the government qualifications. 

After I pulled up the cars.gov website (that they seemed to have never seen before) we called and after another hour confirmed my car qualified.  This confusion is coming from a BIG name dealership in Chicago.”

With dealers not on the same page as the NHTSA and if dealers are not using www.cars.gov as the final determination for eligibility, the Cash for Clunkers Russian Roulette game will be leaving many dealers dead on the floor.

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