You may have noticed some pretty new trade-in vehicles being traded by people taking advantage of the government’s overwhelmingly popular Cash for Clunkers rebate program. Since one of the main goals of Cash for Clunkers is to get the 18 miles-per-gallon or less “gas-guzzler” vehicles off the road, are auto dealers allowed to resell those later model trade-ins, and if not, what happens to them?
Under the Car Allowance Rebate System (CARS) Act – the federal law that created the Cash for Clunkers program – dealers are NOT allowed to resell the trade-ins. In fact, The CARS Act requires that the trade-in vehicle be crushed or shredded so that it will not be resold for use in the United States or elsewhere as an automobile. The auto recycling services hired by the auto dealers to crush or shred their Cash for Clunker trade-ins are allowed to sell some of the vehicle’s parts before destroying it, as long as those parts do not include the engine or drive train.
Because of this requirement, the value of the trade-in negotiated with the auto dealer will rarely exceed the scrap value of the vehicle. The CARS Act requires the dealer to disclose to the customer the estimated scrap value of their trade-in vehicle. So, owners of newer vehicles with trade-in values higher than their scrap value plus the Cash for Clunkers rebate may be better off buying their new vehicle conventionally.
Also See:
Cash for Clunkers Car List: Is Your Trade-in Eligible?
Congress Extends Cash for Clunkers Program (Environment)
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