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'Cash for clunkers' rules are released, sparking a rush

The arrival of the 100-page federal document setting forth how drivers can trade in their gas guzzlers for cash sets off a traffic jam of dealer registrations that overwhelms government computers.

July 25, 2009|Martin Zimmerman

Clunkermania officially began Friday.

The federal government finally released the rules that dealers and their customers have to follow to participate in the much-discussed "cash for clunkers" program, which can provide consumers with up to $4,500 when they trade in an older vehicle and buy a newer, more fuel-efficient model from a participating dealer.

The law creating the $1-billion program went into effect July 1, but many dealers were reluctant to participate until they got a look at the rules. The arrival of the 100-plus-page document Friday morning sparked a registration rush that overwhelmed the government's computers, resulting in waits of two hours or more, the National Automobile Dealers Assn. reported.

The program is also exciting a fair amount of interest among consumers. Online auto information provider Edmunds .com said its traffic has been at record levels in recent weeks. Part of that comes from what may be the beginnings of a rebound in car sales, but the clunkers program is helping.

"We've clearly had traffic coming in that's being driven by 'cash for clunkers,' " said Marc Cannon, spokesman for AutoNation Inc., which owns 77 dealerships in California, including Power Chevrolet lots in Valencia, Hawthorne and Irvine. "We started doing deals early this morning."

Automakers are also jumping on the bandwagon. General Motors and Chrysler ran full-page ads in Friday's Times touting the program, and several manufacturers are offering special incentives.

The government estimates that the program will generate sales of 250,000 new cars, although Edmunds.com Chief Executive Jeremy Anwyl figures that about 200,000 of those sales would have happened anyway as part of the natural retirement rate of old vehicles.

Anwyl also notes that the rules are fiendishly complicated. Much of that is a result of the government's effort to prevent fraud. For instance, the program requires trade-ins to be junked, and the rules include elaborate procedures that dealers must follow to permanently disable the engines of clunker trade-ins so they can't be resold. (Part of the idea behind the law was to get older, less-fuel-efficient vehicles off the road.)

Shoppers may also be in for some frustration, above and beyond the tight restrictions they need to meet to qualify (read on for details on how the program works). For example, buyers must show proof of one year's insurance -- which would be recorded on their policy but may not be reflected on the insurance card they carry in their wallet.

Consumers should also be wary of official-looking clunkers websites that have sprung up, many of them asking for personal information. The official government website for the programs is www.cars.gov. The government has also set up a hotline at (866) 227-7891.

Kelley Blue Book (www .kbb.com) and Edmunds.com offer online calculators to help buyers decide whether a particular deal makes sense under the clunkers program.

Here are some questions and answers about the program.

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How do I know if my trade-in vehicle is eligible for the program?

It must have been manufactured in 1984 or later and have a combined city-highway fuel economy rated at 18 miles per gallon or less. The program is advantageous only if the trade-in value is less than the minimum $3,500 offered by the government.

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Can the credit be applied to any new vehicle?

All imports and domestics with a list price under $45,000 are eligible, as long as they meet fuel economy standards of at least 22 mpg for cars; 18 mpg for SUVs, small pickups and minivans; and 15 mpg for large vans and trucks. The new vehicle's fuel economy must exceed the trade-in's by at least 4 mpg for cars, 2 mpg for SUVs and 1 mpg for large trucks to qualify for the $3,500 rebate. The full $4,500 rebate kicks in at an increase of 10 mpg, 5 mpg and 2 mpg, respectively.

Remember, the mileage numbers are based on combined city-highway driving mileage as measured by the federal government -- not the mileage you actually get. The fuel economy numbers can be found at www.fueleconomy .gov.

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What happens to the clunkers after the trade-in? Can they be resold?

The Car Allowance Rebate System requires that the trade-in be crushed or shredded so that it will not be resold. The wrecking yard is allowed to salvage some parts for resale, excluding the engine and drivetrain.

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Can I game the system by going to a junkyard and buying a wreck to use as a trade-in?

No, the program requires the vehicle be in drivable condition, continuously insured and registered to the same owner for at least a year before the trade-in.

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I have several clunkers in my garage. Can I trade them all in?

There is a limit of one trade-in per owner under the program, with the credit applying to the lease or purchase of a single new vehicle.

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How long does the program last?

Until Nov. 1 or until the $1 billion is spent, whichever comes first.

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martin.zimmerman @latimes.com

The Chicago Tribune contributed to this report.

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