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Car Dealers Trying to Continue "Cash for Clunkers" with Their Own Twist

August 27, 2009

Auto Stimulus Program A group of 73 car dealerships have banded together to offer their own "cash for clunkers" incentive program.

It's called the "Auto Stimulus Plan" and it was launched at the same time as "cash for clunkers" as a way to help car shoppers who didn't have a qualifying trade-in.

Now that "cash for clunkers" has ended, the organizers are hoping car shoppers see it as a replacement to the terminated program.

Here's how it works: The Auto Stimulus Plan offers incentives up to $4,500 for a qualifying trade-in until November 1, 2009. The only requirement is that the vehicle being traded in be:

There are no minimum mpg requirements on the trade-in, but the new car purchased has to have a minimum improvement of 2 mpg.

It all sounds good at first, but when you delve deeper into the details, it's clear that the program is nowhere near as good as "cash for clunkers".

The "Auto Stimulus Plan" incentive is based on a percentage of the average trade-in value set by the NADA Official Used Car Guide. If you buy a new car that gets 2 mpg better than your trade-in, the incentive is 10% of the trade-in value as set by the NADA Guide. If you buy a car that gets at least 5 mpg better, than the incentive is 20% of the trade-in value.

So let's say you have a 1999 Jeep Grand Cherokee that you're trading in as part of the program. NADA Guides might have it valued at $3,000. Under the "Auto Stimulus Plan", the maximum incentive you would get is $600 (20% of $3,000). If you were to sell this car in a private transaction, you would likely get more than $3,600 for it. Furthermore, some dealers are willing to pay more than what NADA Guides lists anyway, so it's possible you could get a better deal on the trade-in just by shopping it around to other dealers.

The only way to qualify for the full $4,500 incentive is to trade-in a car worth nearly $23,000. There just aren't many models that dealers are willing to buy at that price.

In our opinion, the "Auto Stimulus Plan" seems like a clever way for dealers to market themselves. Car shoppers are unlikely to save a significant amount through this program.

My Recommendation for Car Shoppers

TrueCar, Edmunds, and 1-800 Car Show are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.

New York Tri-State Residents - Important:

There is a new car leasing service called Carvoy, available to NY tri-state area residents, which I recommend you try - especially if you hate the stress of haggling with car dealerships. Carvoy provides pre-negotiated lease deals, calculated with taxes and all fees incuded so you know exactly what it will cost. Here is my list of Best Carvoy deals, updated each month.

- Gregg Fidan

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Gregg Fidan

About: Gregg Fidan

Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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