Cash for Clunkers Dealers to be Audited for Program Compliance

In a cautionary email sent on August 31, the National Automobile Dealers Association (NADA) advised its member dealers to prepare for random audits of their recent Cash for Clunkers transactions.

The email instructed dealers to “Please make sure that all transaction paperwork and trade-in vehicles are in order.”

Similar emails were sent to members of the Virginia Automobile Dealers Association and Wisconsin Automobile and Truck Dealers Association. The communications were prompted by the federal government’s announcement that it plans to start making random, unscheduled visits to dealerships that participated in the federal CARS program for the purpose of auditing their compliance with the program’s rules.

According to Bailey Wood, a spokesman for the NADA, the audits are intended to identify incidents of fraud that may have been committed by dealers who failed to dispose of trade-in vehicles in the manner prescribed by the Department of Transportation.

Dealers who participated in the program were required to follow a detailed method of disabling the engines of all trade-ins and to then have the disabled vehicles crushed at an auto salvage facility.

A spokesperson for the Virginia Automobile Dealers Association said, “We expect that a high percentage of dealers will be audited.”

The Department of Transportation’s announcement that it will conduct spot audits should come as no surprise to dealers. Authorization for the audits was contained in the CARS bill which was signed into law by President Obama in June. The audits are intended to identify dealer fraud which has plagued similar Cash for Clunkers programs carried out in a number of European countries in recent months.

Some dealers, however, have taken issue with the federal governments timing in implementing the audits as many have yet to receive reimbursement for their Clunker transactions.

Virginia ADA president Donald Hall said, “The government seems to be more interested in auditing early on rather than paying early on.”

An NADA survey conducted in four states, including Hall’s home state of Virginia, on August 26 and 27 found that only 5.7% of dealers who participated in the Cash for Clunkers program had received reimbursement from the federal government.

The email sent by the Wisconsin association to its members stated that auditors will be examining a number of documents including the titles, proof of insurance and registrations of trade-in vehicles along with the vehicle identification number of both the trade-in and the new vehicle purchased and, finally, the salvage certificate for the trade-in.

The association also expects that auditors will physically inspect the vehicle identification numbers of any disabled trade-ins that have not yet been demolished. Auditors are also expected to attempt to start the engines and verify that an engine disablement sticker is attached to the engine as prescribed by the Department of Transportation.

Chris Snyder, general counsel for the Wisconsin Automobile and Truck Dealers Association, says that the emails were also intended to help keep dealers from becoming the victims of fraud. “Dealers are sometimes targets for scam artists,” he says, “so they should know who’s coming in to look at their records,”

Both the Virginia and Wisconsin associations have urged their member dealers to verify the credentials of the auditors before providing any information.

Snyder said that he has attempted to contact the Department of Transportation for instruction and guidance on the audits but has, so far, been unsuccessful.

Posted in In the News

Search for a vehicle

About Us  |    Contact Us  |    Terms of Use  |    Privacy Policy  |    Auto Dealer Marketing  |    Site Map

©2018,, LLC All rights reserved.