For Immediate Release - August 11, 2009

Consumers Urged to Drive a Smart Bargain to Maximize Cash for Clunkers Program

BOSTON - Aug. 11, 2009 - Following President Obama's signature on legislation approving an extension for the popular Cash for Clunkers program, Undersecretary of Consumer Affairs and Business Regulation Barbara Anthony is urging consumers to learn the details of the program and do thorough research before making a purchase.

"We have a sense that some shoppers may have been so thrilled by the rebate, that they may be leaving money on the table in their enthusiasm to wrap up a deal," commented Anthony. "Viewing the rebate as a discount off the sticker price of a car may cause some buyers not to negotiate as aggressively as they should."

According to the Patrick Administration's Office of Consumer Affairs and Business Regulation, since the rebate is treated as an increase in the value of the trade-in, the way to maximize total savings is to separately negotiate the actual selling price of the car, just as a savvy shopper would under normal circumstances. That means the prospective car buyer should find out the dealer's cost of the car they are considering buying from a Website like Edmunds.com or KBB.com, and negotiate off that price. In this way, buyers can more clearly see how much below sticker price (and how close to dealer cost) the car is actually being sold for.

Buyers should also inquire about and try to obtain additional end-of-model-year discounts, manufacturer's incentives, dealer discounts, and reduced-rate financing.

After that, the office recommends that car buyers negotiate the value of the trade-in. While the federal program will credit the dealer with either $3,500 or $4,500 for the trade-in depending on the new car purchased, the buyer may be entitled to a bit more. Under the rules of the program, the dealer has to disclose the scrap value of the old car - the amount it might receive for it from a junkyard. Buyers therefore may be able to negotiate with some dealers to get some of the additional scrap value on top of the $3,500 or $4,500 credit. Buyers should learn the trade-in value of their vehicle before going car shopping, and should not utilize the clunker program if it is worth more than the rebate program offers.

Buyers are also being advised to read their car contracts carefully and not sign any agreement if it contains a clause requiring the purchaser to reimburse the dealer for the rebate should the dealer not receive it from the government.

The below chart is an example of two potential shopping experiences. The final price in the right column includes savings through a hypothetical negotiated car price and receiving a hypothetical discount through the trade-in scrap value.



No Deal Real Deal
New Car Sticker Price:$20,000$20,000
Dealer's Cost:$18,000$18,000
Negotiated Care Price:$20,000$18,500
Trade-in Scrap Value:$0$250
Value Given for Trade-in (under Clunker program)$4,500$4,500
Net Cost of Car $15,500 $13,750

Undersecretary Anthony recommends that consumers check the official Cars.gov website to determine if their old clunker may have been recently reclassified as a vehicle that gets 18 miles per gallon or less - the cutoff for cars to qualify for the program.

"Owners of gas guzzlers that get 19 miles per gallon may have thought they were out of luck, but they could be in for a pleasant surprise," said Anthony. "A new fuel calculation method recently adopted could make their seemingly ineligible car, eligible."

The new calculation method, adopted last year by the federal government, has been applied retroactively to older cars, and has had the general effect of reducing the estimated mileage of most vehicles by at least one to two miles per gallon compared to what their original stickers indicated.