August 10, 2009 at 1:02 pm

Brian J. O'Connor

Protect yourself from 'clunker' scams

Know the rules and do the math to protect yourself

illustration by Diana McNary / The Detroit News)

Now that "Cash for Clunkers" is back on track, let's run down what you need to consider to get the best deal when turning your rust bucket into a rebate.

Lost in the hoopla and subsequent confusion of the Car Allowance Rebate System (CARS) are some important points, such as: not getting scammed, checking your math, doing your due diligence and not tripping yourself up by trying to play it too smart.

So buckle your seat belts (if they still even work) and let's go through a little checklist I like to call "Brian's Clunker Debunker."

Don't get scammed

The Better Business Bureau and the Federal Trade Commission warn against scams that try to steal your Social Security number and other private information under the guise of "registering" you for the clunker rebate or "assisting you with paperwork."

Don't fall for it. It's new car dealers who have to register with the government, since they get the cash, not consumers. You show up, buy a new car, hand over what's left of your old car, and the dealer knocks $3,500 or $4,500 off the price. The dealership handles all the paperwork and, after certifying that the vehicle's engine has been disabled and that the car has been scrapped, gets reimbursed by the government.

Some con artists have set up bogus Web sites to trick you out of your personal information so they can steal your identity and commit other frauds, while certain other thieves may call on the phone. Don't do business with anyone offering you money, either a voucher, money order, check or direct deposit. You don't get any cash in this program -- the money comes off the price of a new car, and the dealer is reimbursed by the feds.

If you suspect fraud related to the CARS program, call the National Highway Traffic and Safety Administration, or NHTSA, at (866) CAR-7891. If you run across a bogus "Cash for Clunkers" Web site, report it to the FTC at ftc.gov or call (877) FTC-HELP. If you think you've already been clobbered by a clunker scam, go to the FTC Web site or call (877) FTC-HELP (877-382-4357) to file a report.

Don't pull your own scam

Thinking of pouring sawdust in the transmission of that rust heap you told your wife you were "restoring" so you can coax it to the dealer and claim some easy clunker bucks? Forget it.

The vehicle has to be driveable, less than 25 years old, and registered and insured in your name for 12 months before the trade-in to be eligible. You also must have a clear title -- no loans or liens -- in your name. So don't go buying your brother-in-law's hulking heap for $2,000 and try to clunkerize it for your own trade-in credit.

And don't try to trade in multiple cars: The program is strictly one to a customer.

Check out your dealer

We all know that new-car dealers are fine, upstanding business owners who like to buy lots of huge American flags, but even a barrel of the finest apples has a bad one or two, so check the dealer with the Better Business Bureau of Detroit & Eastern Michigan, either at easternmichigan.bbb.org or call (248) 644-9100.

There have been reports of dealers adding notations to sales agreements that try to make car buyers liable to repay the $3,500 or $4,500 credit if, for some reason, the dealer doesn't receive payment from the government. That can't be done, according to the Department of Transportation. If a dealer tries to add such a clause, call the CARS fraud line, where a government employee will remind the dealer about the $15,000 penalty.

Likewise, if a dealer tries a bait and switch, such as saying your car qualifies, then taking your trade-in and telling you it doesn't, call the fraud number.

To make sure everything is on the up-and-up, you should be asked to sign an NHTSA "Summary of Sale/Lease & Certifications Form (OMB No. 2127-0660)" that spells out all aspects of your clunker deal, and squarely puts the onus on the dealer to comply with the law. Check it carefully.

Do you still qualify?

Did you pull out your old original EPA window sticker to get your car's mileage, or check the official http://www.fueleconomy.gov">www.fueleconomy.gov Web site sometime last month to make sure your clunker qualifies?

Well, check again.

As the feds rushed to put together -- and I'm not making this up -- the 136 pages of rules governing CARS, the EPA reviewed the fuel economy stats on 30,000 vehicles from the past 25 years and changed the eligibility of 164 cars or light trucks. The agency says 78 vehicles that used to qualify as trade-ins under CARS now don't; 86 that didn't qualify now do.

According to NHTSA, which administers "Cash for Clunkers," your deal is OK on the 78 disqualified vehicles if the transaction occurred on or before the new list came out on July 24. Sales involving the 86 that were added to the list of eligible vehicles are OK if those transactions happened on or after July 24.

Do the math

As I've written earlier, "Cash for Clunkers" won't be prying my beloved 1995 Buick Roadmaster Estate Wagon from my rust-stained hands. Even with a $4,500 rebate, it's still a better deal to buy a good, 2- or 3-year-old certified used car than to buy new and take the big depreciation hit. And despite a big rebate, you still have to make sure your family budget can handle a new car payment.

If your would-be clunker still is a reliable daily driver like my 18 mpg Roadmonster, do the math on your break-even point. Say you end up shelling out $15,000 for a new car after your clunker cash, plus about $2,500 in interest on a four-year loan, to get a new, more fuel-efficient vehicle. At an average cost of $2.62 a gallon for gas this week in Metro Detroit, if my new ride gets 4 miles per gallon better mileage, I'd need to drive it for more than 10 years before I could recoup any real savings on gas.

One last item to check: How much is your clunker really worth? If it's more than the CARS rebate, you're better off selling it yourself or trading it in straight up instead of taking the government rebate. You can check your car's approximate value by calling your bank or credit union, or going online to Kelley Blue Book at kbb.com or at Edmunds.com.

Get all you've got coming

Besides your clunker credit, you're also supposed to get a credit for the scrap value of your trade-in, minus up to $50 for the dealer's time and trouble. Ask the dealer what that value is and that it's calculated as part of your deal.

Just because you're getting a big credit doesn't mean you should overpay, so research the car you want and make sure you get a good price. Sure, you're taking $3,500 or $4,500 off the top, but you'll still pay the difference.

Your clunker credit also is supposed to be in addition to other regular rebates and incentives from the dealer, so check those out beforehand with Edmunds or other Web sites, or buy a car price report from Consumer Reports, either online or by calling (800) 333-6300 for a fax or mailed copy. If you're told a current rebate or incentive doesn't apply because you're trading in under the clunkers program, insist that you're entitled and that the dealer check the program rules.

And don't forget that your generous Uncle Sam offers some other benefits besides the clunker cash. If you're buying a hybrid, remember that you can get a tax credit, making it more affordable.

Also, as part of the American Recovery and Reinvestment Act of 2009, you can deduct state and local sales and excise taxes on new cars. Cars bought under the CARS program will qualify under the program. The deduction phases out if your modified adjusted gross income is $125,000-$135,000 for individual filers, $250,000 to $260,000 for joint filers.

Don't throw anything away

Finally, pull out the CD deck, the GPS, the spare tire and anything else you can use, since the vehicle is going to the shredder, not to another driver.

Watch the gas tank, too, so you don't give away a clunker holding $40 worth of fuel. I'd aim to pull into the lot running on fumes.

Good luck, and happy clunkering!

boconnor@detnews.com">boconnor@detnews.com (313)222-2145

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