Cash for Clunkers: Careful Before You Buy
George Boelcke FCI
August 10, 2009
This past week, the federal government injected another $2 billion into the cash for clunker program. If you´re considering buying a new vehicle, and have an old vehicle that qualifies under the program, you´ll love the additional time and money in the program. It was also welcome news to car manufacturers, dealers and sales staff, who were certainly busy in July.
But it should be pointed out that most of the initial waves of sales were to vast numbers of buyers who sat on the sidelines in April, May, and June, waiting for the program to work its way through Congress.
For this $2 billion, however, there is no rush. The money will not run out for some time, and it´s available until Labor Day, in any event. The problem now, for anyone wishing to buy a car, is that dealers may be running short of qualifying vehicles.
Before you rush out to get in on the "free" money, ask yourself whether you really need a new vehicle, and whether you can honestly afford the financial pain of the new payments for years to come. The most common excuses we make to ourselves are:
We just had a new baby, so we "needed" to buy a new or bigger vehicle anyway. Nice try – you "wanted to," not needed to. It was just a great excuse to do so, but you´ve now spent $30 to $50,000 or more over the next five years on payments, interest, maintenance, insurance, etc. (for the full cost of ownership, and a real eye opener, go to edmunds.com)
Our car was going to cost us $500 in repairs, so it was smarter to just buy a new vehicle with a warranty. Not so fast: A one-time $500 repair is not the same as an average $472 car payment, which is more like $1,000 before taxes, and adding insurance and maintenance. Plus the pain of one $500 repair is a lot less than the semi-permanent pain of five to seven years of payments!
The cash for clunker program is free money, so it´s a great time to buy. Maybe yes, maybe no. Let´s be honest: When we want something bad enough, we can easily kid ourselves that this is somehow like getting a "free" vehicle. At that point, we focus on what we can save, instead of the huge amount it´ll cost us in payments, interest, and radical changes to our budget and debt load.
If you really do need to purchase a new vehicle, and couldn´t do with a two or three-year old model that would be way cheaper in the first place, the timing is certainly great. Just remember to follow these five steps for your best deal, smartest way to shop:
The maximum cash for clunker rebate is $4,500. But that is the total for your clunker trade-in. If your current vehicle is worth $100, that´s a great deal. If it´s worth $3,000, however, keep in mind that the real rebate you´re getting is $1,500 net.
Never tell a dealer you have a qualified clunker to trade – never, ever! Make your best deal for the vehicle and THEN have them approve and deduct the clunker rebate off the total you have negotiated.
Always get three quotes from three dealers before you make a purchase decision. Do not let a sales person hype or pressure you that it´s "the last one" they have in stock. If that´s the case, look the sales person in the eyes and tell them that you´ll let someone else have it then. They´ll back off their lie in a hurry!
Careful that you´re not losing out on the actual manufacturers rebate on a vehicle. These days, almost all vehicles have a cash rebate. You need to find out what that rebate is, to assure you are also getting that amount off your price, in addition to negotiating down from the sticker price. You will find dealers who will simply give you the clunker rebate, and have you sign a form that states something along the lines of "all other applicable rebates assigned to dealer." Read what you´re signing, know what rebates are available BEFORE you set foot in the dealership, and assure you are also receiving it as a separate line on your purchase agreement.
Get the total amount financed before any add-ons, undercoating, warranties, or other optional profit-makers for the dealer. Take that amount and get two quotes on the financing. Make sure one of them is from a credit union, and don´t settle for the "easy" financing at the dealership, because easy will generally cost you a lot more.
But it should be pointed out that most of the initial waves of sales were to vast numbers of buyers who sat on the sidelines in April, May, and June, waiting for the program to work its way through Congress.
For this $2 billion, however, there is no rush. The money will not run out for some time, and it´s available until Labor Day, in any event. The problem now, for anyone wishing to buy a car, is that dealers may be running short of qualifying vehicles.
Before you rush out to get in on the "free" money, ask yourself whether you really need a new vehicle, and whether you can honestly afford the financial pain of the new payments for years to come. The most common excuses we make to ourselves are:
We just had a new baby, so we "needed" to buy a new or bigger vehicle anyway. Nice try – you "wanted to," not needed to. It was just a great excuse to do so, but you´ve now spent $30 to $50,000 or more over the next five years on payments, interest, maintenance, insurance, etc. (for the full cost of ownership, and a real eye opener, go to edmunds.com)
Our car was going to cost us $500 in repairs, so it was smarter to just buy a new vehicle with a warranty. Not so fast: A one-time $500 repair is not the same as an average $472 car payment, which is more like $1,000 before taxes, and adding insurance and maintenance. Plus the pain of one $500 repair is a lot less than the semi-permanent pain of five to seven years of payments!
The cash for clunker program is free money, so it´s a great time to buy. Maybe yes, maybe no. Let´s be honest: When we want something bad enough, we can easily kid ourselves that this is somehow like getting a "free" vehicle. At that point, we focus on what we can save, instead of the huge amount it´ll cost us in payments, interest, and radical changes to our budget and debt load.
If you really do need to purchase a new vehicle, and couldn´t do with a two or three-year old model that would be way cheaper in the first place, the timing is certainly great. Just remember to follow these five steps for your best deal, smartest way to shop:
The maximum cash for clunker rebate is $4,500. But that is the total for your clunker trade-in. If your current vehicle is worth $100, that´s a great deal. If it´s worth $3,000, however, keep in mind that the real rebate you´re getting is $1,500 net.
Never tell a dealer you have a qualified clunker to trade – never, ever! Make your best deal for the vehicle and THEN have them approve and deduct the clunker rebate off the total you have negotiated.
Always get three quotes from three dealers before you make a purchase decision. Do not let a sales person hype or pressure you that it´s "the last one" they have in stock. If that´s the case, look the sales person in the eyes and tell them that you´ll let someone else have it then. They´ll back off their lie in a hurry!
Careful that you´re not losing out on the actual manufacturers rebate on a vehicle. These days, almost all vehicles have a cash rebate. You need to find out what that rebate is, to assure you are also getting that amount off your price, in addition to negotiating down from the sticker price. You will find dealers who will simply give you the clunker rebate, and have you sign a form that states something along the lines of "all other applicable rebates assigned to dealer." Read what you´re signing, know what rebates are available BEFORE you set foot in the dealership, and assure you are also receiving it as a separate line on your purchase agreement.
Get the total amount financed before any add-ons, undercoating, warranties, or other optional profit-makers for the dealer. Take that amount and get two quotes on the financing. Make sure one of them is from a credit union, and don´t settle for the "easy" financing at the dealership, because easy will generally cost you a lot more.
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