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CARS Car Allowance Rebate System Webinar NADA Members July 7, 2009 The Law President Obama signed the Consumer Assistance to Recycle and Save Act on June 24

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CARS

Car Allowance Rebate System

Webinar

NADA Members

July 7, 2009


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The Law

  • President Obama signed the Consumer Assistance to Recycle and Save Act on June 24

  • Establishes program within NHTSA to provide government funds to facilitate purchase or lease of new fuel-efficient vehicle in return for trade-in that is less fuel-efficient


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NHTSA’s Duties

  • Issue a final rule in 30 days (by July 24) setting out requirements for participation and disposal of trade-ins

  • Create an Internet Web site within 30 days to provide program information

  • Develop a system for dealer registration

  • Develop a system for processing transactions

  • Develop a new organization within NHTSA to run program

  • Prevent fraud; penalize violations


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Progress by NHTSA

  • Web site established June 19: www.cars.gov; basic information and frequent updates

  • Retained contractor to design registration and transaction system

  • Obtained dealer registration data from OEMs

  • Retained contractor to operate transaction review process

  • Drafting rule so as to meet July 24 deadline


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Consumer Information

  • www.cars.gov permits consumers to find EPA mpg data (link to www.fueleconomy.gov) and learn basics of program

  • Will soon contain list of eligible vehicles

  • Will contain list of registered dealers

  • Vehicle hotline expanded

    • Added 866-CAR-7891

  • Ongoing media outreach

    • Use press to disseminate information

    • Warn against fraudulent sites

  • Ad campaign being developed

    • TV, radio, Internet, print

    • Materials available for dealer use


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    Program Dates

    • Law says rebates limited to transactions between July 1, 2009, and November 1, 2009

      • Program will end when funds are exhausted, even if before November 1

    • Law also says NHTSA has 30 days to issue rules to implement the program, and NHTSA will need all of that time to complete rule

    • Deals made on or after July 1 risky for dealer because transaction may not meet all specifications; NHTSA not authorized to pay unless requirements met


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    Program Basics

    • Customers trading in an eligible vehicle receive monetary credit toward purchasing or leasing a new eligible vehicle

    • If conditions are met, NHTSA makes an electronic payment to the dealer

    • Trade-in vehicle must be crushed or shredded


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    Registration Process

    • Dealer lists provided by OEMs in early July

    • NHTSA’s contractor will send each dealer a registration letter starting in mid-July

    • Dealer will follow instructions in letter to complete registration process

    • Dealer will certify to abide by program rules and inform NHTSA of change in license or franchise

    • System hopefully ready to begin registration by July 24

    • Submission of financial information completes registration

      • 2-3 day process, confirmation of tax ID and bank or financial institution information


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    Transaction Process

    • Registered dealer will have online access to CARS transaction system

    • For each transaction, dealer will provide essential information using an online form: buyer info, VINs, mpg of each, etc.

    • Submission will include attachments: registration, insurance proof, title, certification from disposal facility, deal sheet showing MSRP, salvage value, all rebates, etc.

    • NHTSA will review all submissions, reject those that are incomplete or incorrect, and send payment on those that meet all requirements


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    CARS Credit plus…

    • CARS Act requires the dealer to use the CARS credit in addition to rebates or discounts offered or advertised by the dealer and/or OEM. The dealer may not use this credit to offset these rebates or discounts.

    • Dealer can combine the CARS credit with other State and Federal incentives, e.g., the Hybrid vehicle credit.

    • Dealer must disclose best estimate of “scrap value” to customer

      • Dealer may retain $50 of that for administrative costs


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    Value of Credits

    • New Passenger Car

      • $3,500 credit if its combined fuel economy at least 4 mpg above that of trade-in

      • $4,500 if difference at least 10 mpg

    • New Category 1 Truck

      • $3,500 if at least 2 mpg higher

      • $4,500 if at least 5 mpg higher


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    Value of Credits

    • New Category 2 Truck

      • $3,500 if trade-in is Category 2 and new truck at least 1 mpg higher OR trade-in is Category 3 of MY 2001 or earlier

      • $4,500 if trade-in is Category 2 and new truck at least 2 mpg higher

    • New Category 3 Truck

      • $3,500 if trade-in is Category 3 of MY 2001 or earlier and similar size or larger than new truck


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    Trade-in Vehicle

    • CARS Act established four criteria

      • Must be in drivable condition

      • Must have been continuously insured, registered to the same owner for previous 12 months

      • Must be less than 25 years old at time of trade-in

      • Combined “new” fuel economy rating less than 18 mpg (Category 3 not rated)

    • Category 3 work trucks no newer than MY 2001


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    Category 3 Trucks

    • May be traded in only for a Category 2 or Category 3 truck

    • Not more than 7.5 percent of program funds available for purchase or lease of new vehicles in this category

      • Once limit is reached, no more payments will be made for these transactions


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    Vehicle to Lease or Purchase

    • CARS Act applies to new vehicles

    • MSRP must not exceed $45,000

    • Must achieve certain fuel economy ratings

      • Passenger vehicles at least 22 mpg

      • Category 1 trucks at least 18 mpg

      • Category 2 trucks at least 15 mpg

      • Category 3 trucks no mpg requirement

        • Other special requirements apply


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    Vehicle Categories

    • Passenger automobiles

      • Passenger cars

    • Category 1 truck

      • Non-passenger automobiles

        • SUVs, small and medium pickups, small and medium cargo vans


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    Vehicle Categories

    • Category 2 truck

      • Large van or large pickup truck

        • More than 115-inch wheelbase for pickups, more than 124-inch wheelbase for vans

    • Category 3 truck

      • Work truck rated between 8,500 lbs and 10,000 lbs gross vehicle weight rating (those with cargo beds 72 inches or more in length) and very large cargo vans


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    Vehicle Disposal

    • Dealer must certify that it will not sell, lease, exchange or dispose of trade-in for use as an auto in United States or any country

    • Dealer must transfer trade-in to entity that will ensure that the vehicle is crushed or shredded

    • Disposal entity can sell parts except engine block and drive train (unless drive train sold as separate parts)

    • NHTSA will publish list of disposal entities

    • NHTSA may include requirements for how engine can be rendered inoperative by dealer to reduce possibility of continued use


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    Preventing Fraud

    • Statute provides for civil penalties up to $15,000 for violations; clerical errors are not violations

    • NHTSA will be very aggressive in preventing fraud related to this program and punishing violators if it occurs

    • Dealers, purchasers, and disposal entities will certify to the accuracy of all assertions they make as part of program

    • Note: Willfully false statements may be punishable by criminal fines and imprisonment

    • Dealers and disposal entities should anticipate audits by NHTSA and requests for records


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    Final Points

    • NHTSA is doing everything it can to make this a successful program

    • The short time NHTSA has to implement the program creates significant challenges

    • We understand how anxious everyone is to begin transactions—we hope you all understand the challenges

    • We look forward to continued cooperation with all involved in the program

    • For further information see www.cars.gov