The Differences Between AirCheckTexas Drive a Clean Machine Program

and CARS (AKA “Cash For Clunkers”)

In 16 Texas counties in and around Dallas, Austin and Houston, qualifying Texans can apply for vouchers worth $3,000 or $3,500 to apply to the purchase of a new or late-model used vehicle. In short, the program sounds similar to the “Cash For Clunkers” legislation that’s had the industry abuzz, but the two programs are quite different. Texas’ vehicle replacement program, known as AirCheckTexas Drive a Clean Machine, also has income limits based on household size. For example, if a single-person household nets more than $32,490, that person is ineligible.

Conversely, the national program, “Cash For Clunkers” (officially named the Car Allowance Rebate System, or CARS), only applies to the purchase or lease (must be at least a five-year lease) of new vehicles and has no set parameters on income. CARS does, however, have parameters on the vehicles involved.

Stephen Barrett, owner of Barrett Motors (which consists of three buy here pay here locations northeast of Dallas), participates in AirCheckTexas and thinks that because the program is limited to low-income consumers, it’s flawed. He said, “It is designed to take someone who has a low income level and give them an avenue to purchase a newer, more fuel-efficient means of transportation. That all looks and sounds good on paper, but the fact of the matter is that many of these consumers are trading in vehicles that are paid for and incurring new debt that they may or may not be able to handle. We’ve had to be careful to make sure that, even though these consumers have a voucher, they are able to afford the debt they are going to incur with the purchase.”

Another Texas BHPH dealer, Jose Reyes, owner of Uncle Johnny’s Good Cars in Houston, said there has been some confusion surrounding the AirCheckTexas program. He said, “Our biggest problem is that the consensus of the general public was that with $3,000 down, they could go to any lot and just automatically qualify and buy a car, and 90 percent of the applications that I took or the persons I talked to were actually very, very limited on their ability to pay.” Either their income was too low or they had a very poor credit history.  

In 2008, Reyes only put two deals together with AirCheckTexas vouchers. “We haven’t sold one through the program this year yet. I believe for a while [the program] was put on hold. I think the funds dried out and they were waiting for new funds.”

Barrett said, “I don’t anticipate a discontinuance of the AirCheck Program” while the CARS program is in effect, which is slated to last until November 1, 2009. His dealerships see several vehicles a month go through the AirCheckTexas program.

Dealer participation in either program is optional. At the time this article was written, the process to register for the CARS program had not begun. For the most up-to-date information, sign up on the government site, www.CARS.gov, to receive e-mail updates as details are released.

Before the legislation was signed into law by the president, fraudulent sites claiming to be CARS sign-up portals for both consumers and dealers were popping up. A June 23, 2009, CNNMoney.com article entitled, “Beware ‘Cash For Clunkers’ Scams,” stated, “One clue that Web sites aren't real is if they use the name ‘Cash for Clunkers.’” Dealers should look for the official program moniker, Car Allowance Rebate System. There is only one government site for this program ( HYPERLINK "http://www.CARS.gov" www.CARS.gov) at press time. By July 24, NHTSA will make available on an Internet Web site a comprehensive list of the trucks that fall into the various categories and meet the requirements of the program for additional clarity.

Program Specifics:

CARS Program Specifics
CARS gives consumers who purchase or lease a new vehicle $3,500 or $4,500 depending on their “clunker” and what they purchase. According to CARS.gov, for a “clunker” to qualify for CARS, it must:

“have been manufactured less than 25 years before the date you trade it in
have a ‘new’ combined city/highway fuel economy of 18 miles per gallon or less
be in drivable condition
be continuously insured and registered to the same owner for the full year preceding the trade-in”

The CARS site adds, “Note that work trucks (i.e., very large pickup trucks and cargo vans) have different requirements.”

In addition to those requirements for the trade-in, in order to qualify for $3,500 of CARS money, the newly purchased/leased vehicle must be:

a passenger automobile getting at least 4 miles per gallon higher than the trade-in vehicle
a category 1 truck getting at least 2 miles per gallon higher than the trade-in vehicle
a category 2 truck getting at least 15 miles per gallon and at least 1 mile per gallon higher than the trade-in vehicle if the trade-in is a category 2 truck; if the trade-in is a category 3 truck, it must be model year 2001 or older
a category 3 truck if the trade-in vehicle is a category 3 truck model year 2001 or older and is of similar size or larger than the new vehicle
 
In order to qualify for $4,500 of CARS money, the newly purchased/leased vehicle must be:

a passenger automobile getting at least 10 miles per gallon higher than the trade-in vehicle
a category 1 truck getting at least 5 miles per gallon higher than the trade-in vehicle
a category 2 truck getting at least 15 miles per gallon and at least 2 miles per gallon higher than the trade-in, which must be a category 2 truck

The CARS law also states, perhaps to clarify, that the new vehicle must have a combined fuel economy value of at least 22 miles per gallon if it’s a passenger automobile, 18 miles per gallon if it’s a category 1 truck, or 15 miles per gallon if it’s a category 2 truck. Category 3 trucks aren’t rated for fuel economy. Additionally, new vehicles qualifying for CARS must have a manufacturer's suggested retail price of $45,000 or less.

The complete process, according to CARS.gov, is:

1. The consumer determines if he or she qualifies and shops for a new vehicle.

2. The consumer brings title, registration and insurance papers to prove continuous registration and insurance coverage for the past full year to the dealership.

3. When the consumer buys or leases a new vehicle, the dealer handles the submission of all required information to the National Highway Traffic Safety Administration (NHTSA), the government agency overseeing the program.

4. The NHTSA ensures the purchase meets CARS requirements.

5. The dealer is issued the appropriate financial credit about 10 days later by the NHTSA, assuming all program requirements have been met.

AirCheckTexas Vehicle Replacement Program Specifics
AirCheckTexas allows $3,000 for a new or pre-owned car that is up to three model years old, $3,000 for a truck that is new or up to two model years old, or $3,500 for a hybrid vehicle that is new or one model year old. In order for a car to qualify for an AirCheckTexas voucher, it must meet one of the two following sets of conditions, according to the Texas Commission on Environmental Quality (TCEQ) Web site (www.tceq.state.tx.us):

“Failed an emissions test, has been registered in your participating county area for the 12 consecutive months preceding application, and has passed a Texas motor-vehicle safety and emissions inspection within 15 months of your application and driven under its own power to the automobile dealership;

or

At least 10 years old and gasoline powered, driven under its own power to the automobile dealership, registered in your participating county area for the 12 consecutive months preceding application, and has passed a DPS motor-vehicle safety inspection (if more than 24 years old) or safety and emissions inspection (if 24 years old or less) within 15 months of application”

The vehicle purchased under AirCheck Texas must be classified as Tier 2 Bin 5, which is a federal pollutant standard, and the vehicle purchased must not exceed $25,000 before tax, title and license fees.

The complete process, according to TCEQ, is as follows:

1. Approval of eligibility is made by the program administrator in one of two ways—the consumer contacts the program administrator to determine eligibility or the dealership contacts the program administrator and provides the administrator with the consumer’s information to determine eligibility.

2. The program administrator issues a voucher.

3. The customer brings the voucher and the retired vehicle with title to the dealer.

4. The AirCheckTexas Vehicle Manifest may also need to be filled out at this time.

5. The customer purchases a replacement vehicle from the dealership.

6. The dealer transfers the retired vehicle and AirCheckTexas Vehicle Manifest to a dismantler.

7. The dealer accounts for the voucher amount on the Application for Texas Certificate of Title, line 21(b), Less Trade-In Amount.

8. The dealer returns the voucher and a copy of the retired vehicle manifest to the program administrator for reimbursement.

Reyes said, “The process is somewhat confusing. There’s a lot of paperwork. Everything has to be just right … It’s kind of hard to get a hold of the program administrator when you need to.” He said that on the couple of deals he’s completed, it’s only taken him two or three days to get reimbursed for the voucher.

For More Information
To stay up to date on the CARS program, visit www.CARS.gov. For more information on the AirCheckTexas Drive a Clean Machine (vehicle replacement program), visit www.tceq.state.tx.us.

Vol. 3, Issue 4