CARS Car Allowance Rebate System Webinar NADA Members July 7, 2009 Webinar NADA Members July 7, 2009

The Law  President Obama signed the Consumer Assistance to Recycle and Save Act on June 24  Establishes program within NHTSA to provide government funds to facilitate purchase or lease of new fuel-efficient vehicle in return for trade-in that is less fuel-efficient  President Obama signed the Consumer Assistance to Recycle and Save Act on June 24  Establishes program within NHTSA to provide government funds to facilitate purchase or lease of new fuel-efficient vehicle in return for trade-in that is less fuel-efficient

NHTSA’s Duties  Issue a final rule in 30 days (by July 24) setting out requirements for participation and disposal of trade-ins  Create an Internet Web site within 30 days to provide program information  Develop a system for dealer registration  Develop a system for processing transactions  Develop a new organization within NHTSA to run program  Prevent fraud; penalize violations  Issue a final rule in 30 days (by July 24) setting out requirements for participation and disposal of trade-ins  Create an Internet Web site within 30 days to provide program information  Develop a system for dealer registration  Develop a system for processing transactions  Develop a new organization within NHTSA to run program  Prevent fraud; penalize violations

Progress by NHTSA  Web site established June 19: basic information and frequent updateswww.cars.gov  Web site established June 19: basic information and frequent updateswww.cars.gov  Retained contractor to design registration and transaction system  Obtained dealer registration data from OEMs  Retained contractor to operate transaction review process  Drafting rule so as to meet July 24 deadline  Retained contractor to design registration and transaction system  Obtained dealer registration data from OEMs  Retained contractor to operate transaction review process  Drafting rule so as to meet July 24 deadline

Consumer Information  permits consumers to find EPA mpg data (link to and learn basics of program  permits consumers to find EPA mpg data (link to and learn basics of program  Will soon contain list of eligible vehicles  Will contain list of registered dealers  Vehicle hotline expanded  Added 866-CAR-7891  Ongoing media outreach  Use press to disseminate information  Warn against fraudulent sites  Ad campaign being developed  TV, radio, Internet, print  Materials available for dealer use  Will soon contain list of eligible vehicles  Will contain list of registered dealers  Vehicle hotline expanded  Added 866-CAR-7891  Ongoing media outreach  Use press to disseminate information  Warn against fraudulent sites  Ad campaign being developed  TV, radio, Internet, print  Materials available for dealer use

Program Dates  Law says rebates limited to transactions between July 1, 2009, and November 1, 2009  Program will end when funds are exhausted, even if before November 1  Law also says NHTSA has 30 days to issue rules to implement the program, and NHTSA will need all of that time to complete rule  Deals made on or after July 1 risky for dealer because transaction may not meet all specifications; NHTSA not authorized to pay unless requirements met  Law says rebates limited to transactions between July 1, 2009, and November 1, 2009  Program will end when funds are exhausted, even if before November 1  Law also says NHTSA has 30 days to issue rules to implement the program, and NHTSA will need all of that time to complete rule  Deals made on or after July 1 risky for dealer because transaction may not meet all specifications; NHTSA not authorized to pay unless requirements met

Program Basics  Customers trading in an eligible vehicle receive monetary credit toward purchasing or leasing a new eligible vehicle  If conditions are met, NHTSA makes an electronic payment to the dealer  Trade-in vehicle must be crushed or shredded  Customers trading in an eligible vehicle receive monetary credit toward purchasing or leasing a new eligible vehicle  If conditions are met, NHTSA makes an electronic payment to the dealer  Trade-in vehicle must be crushed or shredded

Registration Process  Dealer lists provided by OEMs in early July  NHTSA’s contractor will send each dealer a registration letter starting in mid-July  Dealer will follow instructions in letter to complete registration process  Dealer will certify to abide by program rules and inform NHTSA of change in license or franchise  System hopefully ready to begin registration by July 24  Submission of financial information completes registration  2-3 day process, confirmation of tax ID and bank or financial institution information  Dealer lists provided by OEMs in early July  NHTSA’s contractor will send each dealer a registration letter starting in mid-July  Dealer will follow instructions in letter to complete registration process  Dealer will certify to abide by program rules and inform NHTSA of change in license or franchise  System hopefully ready to begin registration by July 24  Submission of financial information completes registration  2-3 day process, confirmation of tax ID and bank or financial institution information

Transaction Process  Registered dealer will have online access to CARS transaction system  For each transaction, dealer will provide essential information using an online form: buyer info, VINs, mpg of each, etc.  Submission will include attachments: registration, insurance proof, title, certification from disposal facility, deal sheet showing MSRP, salvage value, all rebates, etc.  NHTSA will review all submissions, reject those that are incomplete or incorrect, and send payment on those that meet all requirements  Registered dealer will have online access to CARS transaction system  For each transaction, dealer will provide essential information using an online form: buyer info, VINs, mpg of each, etc.  Submission will include attachments: registration, insurance proof, title, certification from disposal facility, deal sheet showing MSRP, salvage value, all rebates, etc.  NHTSA will review all submissions, reject those that are incomplete or incorrect, and send payment on those that meet all requirements

CARS Credit plus…  CARS Act requires the dealer to use the CARS credit in addition to rebates or discounts offered or advertised by the dealer and/or OEM. The dealer may not use this credit to offset these rebates or discounts.  Dealer can combine the CARS credit with other State and Federal incentives, e.g., the Hybrid vehicle credit.  Dealer must disclose best estimate of “scrap value” to customer  Dealer may retain $50 of that for administrative costs  CARS Act requires the dealer to use the CARS credit in addition to rebates or discounts offered or advertised by the dealer and/or OEM. The dealer may not use this credit to offset these rebates or discounts.  Dealer can combine the CARS credit with other State and Federal incentives, e.g., the Hybrid vehicle credit.  Dealer must disclose best estimate of “scrap value” to customer  Dealer may retain $50 of that for administrative costs

Value of Credits  New Passenger Car  $3,500 credit if its combined fuel economy at least 4 mpg above that of trade-in  $4,500 if difference at least 10 mpg  New Category 1 Truck  $3,500 if at least 2 mpg higher  $4,500 if at least 5 mpg higher  New Passenger Car  $3,500 credit if its combined fuel economy at least 4 mpg above that of trade-in  $4,500 if difference at least 10 mpg  New Category 1 Truck  $3,500 if at least 2 mpg higher  $4,500 if at least 5 mpg higher

Value of Credits  New Category 2 Truck  $3,500 if trade-in is Category 2 and new truck at least 1 mpg higher OR trade-in is Category 3 of MY 2001 or earlier  $4,500 if trade-in is Category 2 and new truck at least 2 mpg higher  New Category 3 Truck  $3,500 if trade-in is Category 3 of MY 2001 or earlier and similar size or larger than new truck  New Category 2 Truck  $3,500 if trade-in is Category 2 and new truck at least 1 mpg higher OR trade-in is Category 3 of MY 2001 or earlier  $4,500 if trade-in is Category 2 and new truck at least 2 mpg higher  New Category 3 Truck  $3,500 if trade-in is Category 3 of MY 2001 or earlier and similar size or larger than new truck

Trade-in Vehicle  CARS Act established four criteria  Must be in drivable condition  Must have been continuously insured, registered to the same owner for previous 12 months  Must be less than 25 years old at time of trade-in  Combined “new” fuel economy rating less than 18 mpg (Category 3 not rated)  Category 3 work trucks no newer than MY 2001  CARS Act established four criteria  Must be in drivable condition  Must have been continuously insured, registered to the same owner for previous 12 months  Must be less than 25 years old at time of trade-in  Combined “new” fuel economy rating less than 18 mpg (Category 3 not rated)  Category 3 work trucks no newer than MY 2001

Category 3 Trucks  May be traded in only for a Category 2 or Category 3 truck  Not more than 7.5 percent of program funds available for purchase or lease of new vehicles in this category  Once limit is reached, no more payments will be made for these transactions  May be traded in only for a Category 2 or Category 3 truck  Not more than 7.5 percent of program funds available for purchase or lease of new vehicles in this category  Once limit is reached, no more payments will be made for these transactions

Vehicle to Lease or Purchase  CARS Act applies to new vehicles  MSRP must not exceed $45,000  Must achieve certain fuel economy ratings  Passenger vehicles at least 22 mpg  Category 1 trucks at least 18 mpg  Category 2 trucks at least 15 mpg  Category 3 trucks no mpg requirement  Other special requirements apply  CARS Act applies to new vehicles  MSRP must not exceed $45,000  Must achieve certain fuel economy ratings  Passenger vehicles at least 22 mpg  Category 1 trucks at least 18 mpg  Category 2 trucks at least 15 mpg  Category 3 trucks no mpg requirement  Other special requirements apply

Vehicle Categories  Passenger automobiles  Passenger cars  Category 1 truck  Non-passenger automobiles  SUVs, small and medium pickups, small and medium cargo vans  Passenger automobiles  Passenger cars  Category 1 truck  Non-passenger automobiles  SUVs, small and medium pickups, small and medium cargo vans

Vehicle Categories  Category 2 truck  Large van or large pickup truck  More than 115-inch wheelbase for pickups, more than 124-inch wheelbase for vans  Category 3 truck  Work truck rated between 8,500 lbs and 10,000 lbs gross vehicle weight rating (those with cargo beds 72 inches or more in length) and very large cargo vans  Category 2 truck  Large van or large pickup truck  More than 115-inch wheelbase for pickups, more than 124-inch wheelbase for vans  Category 3 truck  Work truck rated between 8,500 lbs and 10,000 lbs gross vehicle weight rating (those with cargo beds 72 inches or more in length) and very large cargo vans

Vehicle Disposal  Dealer must certify that it will not sell, lease, exchange or dispose of trade-in for use as an auto in United States or any country  Dealer must transfer trade-in to entity that will ensure that the vehicle is crushed or shredded  Disposal entity can sell parts except engine block and drive train (unless drive train sold as separate parts)  NHTSA will publish list of disposal entities  NHTSA may include requirements for how engine can be rendered inoperative by dealer to reduce possibility of continued use  Dealer must certify that it will not sell, lease, exchange or dispose of trade-in for use as an auto in United States or any country  Dealer must transfer trade-in to entity that will ensure that the vehicle is crushed or shredded  Disposal entity can sell parts except engine block and drive train (unless drive train sold as separate parts)  NHTSA will publish list of disposal entities  NHTSA may include requirements for how engine can be rendered inoperative by dealer to reduce possibility of continued use

Preventing Fraud  Statute provides for civil penalties up to $15,000 for violations; clerical errors are not violations  NHTSA will be very aggressive in preventing fraud related to this program and punishing violators if it occurs  Dealers, purchasers, and disposal entities will certify to the accuracy of all assertions they make as part of program  Note: Willfully false statements may be punishable by criminal fines and imprisonment  Dealers and disposal entities should anticipate audits by NHTSA and requests for records  Statute provides for civil penalties up to $15,000 for violations; clerical errors are not violations  NHTSA will be very aggressive in preventing fraud related to this program and punishing violators if it occurs  Dealers, purchasers, and disposal entities will certify to the accuracy of all assertions they make as part of program  Note: Willfully false statements may be punishable by criminal fines and imprisonment  Dealers and disposal entities should anticipate audits by NHTSA and requests for records

Final Points  NHTSA is doing everything it can to make this a successful program  The short time NHTSA has to implement the program creates significant challenges  We understand how anxious everyone is to begin transactions—we hope you all understand the challenges  We look forward to continued cooperation with all involved in the program  For further information see  NHTSA is doing everything it can to make this a successful program  The short time NHTSA has to implement the program creates significant challenges  We understand how anxious everyone is to begin transactions—we hope you all understand the challenges  We look forward to continued cooperation with all involved in the program  For further information see