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Don't get snookered trading in your clunker

As posted on August 13, 2009 on www.ConsumerReports.org

By Anthony Giorgianni

With a federal credit of up to $4,500, the "cash for clunkers" program is providing a big incentive for consumers to trade in their gas guzzlers for the purchase or lease of a new fuel-efficient vehicle. But don’t let all the excitement leave you paying too much, choosing a car you really don’t want, or even ending up victimized.

• Watch for scams. The Better Business Bureau reports that even before the Car Allowance Rebate System (CARS) was passed by Congress, federal authorities found Web sites soliciting consumer names, addresses and Social Security numbers, all on the pretext of registering people for the program. That information could be used to steal your identity or apply for credit in your name. Keep in mind that you don’t need to register or obtain a voucher. A CARS participating dealer will do all the necessary paperwork for you. 

• Avoid contingency agreements. The U.S. Department of Transportation’s CARS Web site is advising car buyers not to asign so-called contingency agreements, promising to reimburse the dealer if the federal government rejects the credit for their purchase. Some dealers are asking customers to sign such a promise, the agency said. Also, dealers must allow you to take your new car immediately. Some are holding onto the vehicle until the CARS application is approved..

• Don't pay too much. Seeing growing demand and smaller vehicle inventories, dealers may resist consumers who attempt to negotiate great deals. That’s especially likely once the CARS program again begins running out of money. Estimates are that current funding should last through Labor Day. 

To make sure you’re getting a good deal, discover the available incentives and even find what other buyers are paying. Consumer Reports car price reports and new car buying kits can provide detailed pricing information to empower negotiations, including dealer holdback, hidden dealer incentives, and rebates. The free TrueCar site provides recommendations for good and great prices based on what others are paying for specific models nationally, regionally, and in your local area.

• Don't buy a bad car. Finally, don’t let the prospect of a CARS credit pressure you to settle for a vehicle you don’t really want. That might happen as inventories for the most reliable, fuel-efficient, and top-rated vehicles decline because of CARS-driven demand. If necessary, forget the credit and wait until a dealer has something worth owning or leasing. It may be a short wait, as 2010 models are arriving this month. As demand declines after the CARS program ends, there should be plenty of good deals to compensate.

For more information about the program, visit the CARS Web site or Consumer Reports Cash for Clunkers resource center.