Seeking more cash for their clunkers

Buyers, dealers scrap over fees

By Lyle Moran
Globe Correspondent / January 2, 2010

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As auto dealers did brisk business during last summer’s Cash for Clunkers rebate program, some pocketed thousands of dollars that could have been paid to customers for the scrap value of their old cars, according to consumer groups, dealers, and customers.

The federal Car Allowance Rebate System program gave rebates of $3,500 or $4,500 to car buyers who traded in a gas guzzler when they bought a new vehicle. But although many buyers did not know it, they were also potentially eligible for up to hundreds of dollars more for the scrap value of their old cars.

The law called on dealers to share with customers the estimated amount each trade-in was worth as scrap. The dealers were allowed to keep $50 of that value, with the rest “negotiable between the consumer and the dealer,’’ according to Eric Bolton, a spokesman for the National Highway Traffic Safety Administration, which ran Cash for Clunkers.

Rosemary Shahan, president of the advocacy group Consumers for Auto Reliability and Safety, said the extra money belonged to custom ers. “I think the rule was clear that dealers were supposed to give you the difference above $50,’’ Shahan said. “It seems like it should have been automatic.’’

Federal records show that 15,189 cars were traded in to more than 370 Massachusetts dealers under Cash for Clunkers. In interviews with 10 dealers that accounted for more than 12 percent of those deals, half said they did not return money to customers for scrap value, which could range up to $800 per car. Two dealers declined to discuss the extra money.

Some car buyers are discovering that they may have lost out. Kyle Monteith traded in his 1989 Jeep Grand Cherokee Laredo for a 2009 Honda Civic at Herb Chambers Honda in Boston. He received a $4,500 federal rebate, but believes he should have received more.

Monteith, a 27-year-old carpenter from Needham, said he asked a Herb Chambers salesman for the scrap value estimate of his clunker, but the salesman said he had not heard about that provision.

Monteith has filed a complaint with the Better Business Bureau in Boston. “I feel like I lost out on a few hundred bucks at least,’’ he said.

Herb Chambers has 44 dealerships in Massachusetts that sold more than 1,000 cars through Cash for Clunkers, according to federal records. Chambers said his dealers received $250 each for clunker scrapped under the program, but customers got none of that money, taking home only the federal rebate.

“Customers got the government money, which is all they were entitled to,’’ Chambers said.

Paul Santo, general manager of Framingham Nissan, said his dealership received 51 trade-ins and did not give customers any money for scrapped clunkers. “We never negotiated on the junk value on cars,’’ Santo said. “Customers were already getting a $4,500 credit.’’

Jeff Batta, general manager of Nissan Automobiles of Marlborough, said his dealership received $125 for each of 57 clunkers it sold as scrap, but did not return any of that money to consumers because none asked for it. “If a customer had a car worth $500, and they were now getting $4,500 from the government, they were very happy with that,’’ Batta said.

Hyannis Honda gave out no scrap value money because the dealership received only $50 each for the 114 clunkers it sold to junkyards, according to president Jay Goodwin. “I do not know of any dealers that gave scrap money to consumers,’’ he said.

But several area dealers said they did return scrap value money to consumers.

Atlantic Toyota Scion in Lynn, which made 89 Cash for Clunker deals, gave back $100 for each trade-in because it sold the clunkers for $150 each, said general manager John Biggio. “I thought it was pretty clear that the dealers could not keep more than $50,’’ he said.

At Gary Rome Hyundai Inc. in Holyoke, each customer was given $50 towards the purchase of their new car, based on a $100 estimated clunker value, said general sales manager Cliff Dexheimer.

“It cost more than $50 per car to transport the clunkers and kill them, but we still gave every customer the scrap value,’’ Dexheimer said.

Robert O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, said his group informed every dealer in the state that they had to give customers a value estimate for their trade-ins, but did not say that money had to go to the customers.

“Nothing in the law said scrap value money had to go to customers,’’ O’Koniewski said. “If a savvy customer raised the issue, the value could be put into the price of the car.’’

John Kroger, Oregon’s attorney general, took the opposite view. “It is pretty clear from the statute that the consumer was to be informed about the remainder of the scrap value money above $50, and was able to make a determination of what to do with it,’’ said Tony Green, a spokesman for Kroger. “If you tell a consumer that the scrap value is worth $300 and that they are entitled to it, I do not think the consumer would tell the dealer they can keep it.’’

On Dec. 17, Kroger unveiled an agreement with two dealerships in the Portland, Ore., area to pay 236 customers a total of $43,571 to settle scrap value disputes. Kroger said the remainder of the more than 200 dealerships in Oregon that participated in Cash for Clunkers need to refund customers for scrap value if they have not done so.

The Cash for Clunkers law authorizes the federal government to levy up to $15,000 in fines for any violation of its provisions. However, the administration’s Bolton said individuals with scrap value complaints should turn to their state attorney general.

In Massachusetts, the office of Attorney General Martha Coakley received 52 consumer complaints about Cash for Clunkers, but only three regarded scrap value, according to spokeswoman Jill Butterworth. She said some of the complaints were resolved, but declined to provide more details.

The Better Business Bureau in Boston received 19 consumer complaints about the Cash for Clunkers program, about half regarding unpaid scrap value rebates, said spokeswoman Paula Fleming. Some complaints have been resolved in negotiations with dealers, she said.