- Many dealers are now requiring consumers to sign an agreement to pay back the ‘clunker’ credit if claim is denied
- Official government rules for the CARS program forbid such agreements
- Consumer advocate groups called on federal officials to crack down on abuse
Some dealers are participating the the CARS program, informally known as ‘cash for clunkers’ but cherry picking to follow the rules that benefit them. Apparently, among all signatures required at closing, many dealers are including a clause that if the government denies the claim for your ‘clunker,’ you must repay the $3,500 or $4,500 credit.
According to Consumer Action, a watchdog group in California:
In some cases, the groups said, dealerships are requiring buyers to sign agreements that oblige the consumer to repay the dealer for the program’s $3,500 or $4,500 rebate if the government denies the claim — despite a government advisory that consumers are not required to sign such agreements. Dealer associations in some states are providing the agreements on their websites for their members to use in clunker transactions.
“Despite the fact that the cash for clunkers program has provided a financial lifeline to car dealerships, some dealers are trying to bend the program’s rules and take advantage of car buyers,” said Joe Ridout, a spokesman for Consumer Action.
The dealers apparently are using such agreements to guarantee that they receive the rebates promised by the program. Cash for clunkers has been plagued by uncertainty concerning its funding and late payments to dealers, who are required to give consumers the rebate up front and then wait for reimbursement by the government.
In addition, some clunker deals are being rejected by the government because they don’t meet all of the program’s myriad specifications. Those include the requirement that vehicle trade-ins must have been continuously insured for 12 months prior to the clunkers transaction.¹.
However, from the CARS program official website, we read:
“Consumers are not required to sign contingency agreements to pay back the dealer should the CARS [Car Allowance Rebate System] credit be rejected.”
While it is not known how widespread the problem is, more and more complaints are being filed with consumer watchdog groups as more applications are processed with the government.
Some on this blog have expressed outraged after dealers have called them back demanding the customer make up for the denied CARS rebate (up to $4,500.00) or else they would have to return the car. Some have already had their trade-in cars destroyed. (Related: Sortable Cash for Clunkers Car List).
Rebates have been denied for an untold number of reasons; including a blank field in the 20-page application.
