New Car Buying Scams

Unfortunately, new car buying scams exist; dealerships are out to make money, and not all of them are honest in their practices. However, with a little research and patience, you can avoid these car-buying scams and get into the best vehicle for you and your situation.

Types of Car Buying Scams

The following are just a few types of car buying scams to look out for when you're buying a car.

Trade-In Scams

Sometimes, dealerships make trade-in vehicles “disappear" within the hustle and bustle of paperwork. Before signing any contracts, make sure your trade-in value is reflected in the final documents; it is supposed to be shown as an amount applied to the overall negotiated new car price.

Push, Pull, or Tow

A type of trade-in scam, the “push, pull, or tow" scam occurs when dealerships advertise a guaranteed price on all trade-ins. The issue with this guarantee is that the money put towards your new car purchase from the trade-in actually comes from incentives and rebates you can put towards your car without a trade-in vehicle.
Essentially, you are giving the dealership your old car for free.

Negative Equity Scams

When you have “negative equity," it means you owe more on the car than it's worth. Some dealerships advertise that they'll pay off your trade-in vehicle, even if you have negative equity. However, often the reality is that they roll the negative equity into your new loan, essentially having you paying for both vehicles and leaving you with even more negative equity.

Four-Square Diagram Scams

The “four-square diagram" represents the:

1. New car price.
2. Trade-in vehicle value.
3. New car loan monthly payment.
4. Down payment.

Generally, dealers use this diagram to figure out what kind of buyer you are. Once they know which of the above you are more concentrated on, they will work to make that specific number sound appealing to you, but raise all the other numbers.
Protect yourself against this car buying scam by doing some research and then walking onto the lot knowing:

• How much the new car is worth.
• How much your trade-in vehicle is worth.
• Your credit history and score.
• Your financing options beyond the dealership.
• You might even obtain a bank auto loan before visiting the dealership.

Dealer Addendum Scams

Simply put, dealer addendum scams occur when a dealer adds on extra costs such as fabric protection or paint sealant.
Basically, this is “profit padding," and sometimes during the negotiations the dealer will remove the costs of these add-ons to make you think you're getting a better deal when, in fact, you're getting the original sticker price.

Poor Credit Score Scams

It's simple: Know your credit score before you go car shopping. If you have a poor credit score (or the dealer says you do), you're at risk for being talked into higher down payments and possibly even higher monthly payments.
Protect yourself against this situation by ordering a copy of your credit score from one or all of “The Big 3" trusted credit agencies (Equifax, Experian, and TransUnion) so you'll know exactly what you're working with and won't have to take the dealer's word for it.
Also, consider obtaining a car loan before actually buying a car (i.e. look for financing from a bank or credit union, or even a blank check auto loan, rather than use dealer financing); this way, the dealer doesn't have the power to tell you what you can and cannot afford. You'll already know.
Learn more about how credit scores affect the car buying process and how you can get a copy of your own credit history in our section on Credit Reports.

Low Monthly Payment Scams

If you present yourself as a monthly payment buyer (a buyer focused on getting the lowest monthly payment), the dealer could jack up the car price, ask for a higher down payment, and lengthen the auto loan term.
Avoid this situation by knowing what you're able to afford. You can do this by:

• Researching the price of the car.
• Determining how large a down payment you can make.
• Negotiating an interest rate you can afford.
• Deciding how long you want to pay for the vehicle (the “auto loan term").

Try our Auto Loan Calculator to get started, and remember, arranging financing before you visit the dealership can help you from getting labeled as a monthly payment buyer.

One Day Only! Scams

Unfortunately, dealerships use this scam to take away from the time you could be using to research a vehicle before you purchase it.
While rebates and incentives can have hard expirations dates, generally the deals offered on day only sales aren't deals you can't find on any other date.

Spot Delivery Scams

Spot delivery scams can happen when you bring home a car before the finance department has completed all the auto loan arrangements. Some dealers encourage this because they count on you being less likely to return the car if the loan arrangements aren't to your liking, i.e. the original financing plan “fell through" or the finalized rates are much higher than originally quoted.
You easily can avoid this scam by not driving away until all financial matters are handled.

Excessive “Dealer Prep" Fee Scams

Admittedly, a dealer preparation or “dealer prep" fee isn't as much of a scam as it is an often excessive fee the dealers are, usually, upfront about; they claim this fee is important because it offsets their efforts to fully prepare the vehicle for you.
However, unlike a warranty cost, you're not actually benefiting from a dealer prep fee in the long run.
Generally, dealer prep fees are permanently printed on buyer documents, but you can negotiate that they remove the fee and/or credit it on the document. If your dealer refuses, it's time to determine how badly you want this car from this dealership.

Additional or “Forced" Warranty Scams

Some dealerships claim you must pay for additional warranties, stating they're required by the bank to lower their risk of loaning to you, but there are experts who point out a bank wouldn't charge you additional money to lower their risk of already loaning money to you.
Simply put, never be forced into extra warranties, and always read the fine print before signing the final paperwork.

How to Check for New Car Tampering

The above reflects several types of car buying scams, but you should also watch out for new car tampering; remember, just because a car is “new" and not “used" doesn't mean someone hasn't tampered with it along the way.
Some of the most common ways to look for new car tampering include:

• Checking the vehicle identification number (VIN).
  
  • Generally, the vehicle identification number, or VIN, is located both on the engine block and the driver's side door jamb. Do a VIN check and make sure these numbers match.
• Inspecting the engine.
  
  • Simply put, make sure the engine looks clean and new. Sure, the new car probably has been driven a few times, but there's no reason for a new car's engine to be full of grease and grime.
• Reading the odometer.
  
  • Similar to the engine, the odometer will reflect that the new car has been driven a few times; however there shouldn't be hundreds of miles on it. Also, if the car looks a little worn but the odometer reading is extremely low, it's likely someone has tampered with the odometer.

Just walk away from these red flags. There are other cars—and dealerships—to check out.

Reporting New Car Buying Scams

Perhaps the simplest way to report new car buying scams is to report the situation to the Better Business Bureau (BBB). Not only can you use the BBB to report any scams you've fallen victim to, but also you can research car dealerships to make sure others haven't been the victims of car buying scams.
You might also consider contacting your state's attorney general, who is the chief legal advisor and law enforcement entity.
Also, don't forget the power of social websites. Today, many reputable websites exist to help consumers share their experiences and encourage—or warn—others about businesses practices.

Source : http://www.dmv.org/buy-sell/new-cars/scams.php
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Best Times to Buy a Car

Just like coffee in the morning, barbecues in the summer, or pumpkin-spice-everything in the fall, some things are just better during certain times of day or year. Buying a car is no different. When you're making a purchase as significant as a car, it's important to have all the information you can on how—and when—to have the best shopping experience.

When to Buy a Car

First thing's first. Before you head to the dealership, make sure you've researched how to buy a car. When you're ready to go car shopping, check the clock or calendar to see if it matches one of these times.

Mid-Day & Mid-Week

The last way anyone wants to appear at a car dealership is desperate or anxious. Coming in at an off-peak time, like the middle of the day or the middle of the week, gives off an air of relaxedness. That—along with the knowledge gained from researching your purchase—will go a long way in the negotiating process.
Dealers who need to keep their numbers up are also typically more willing to work with a buyer during the slower hours of the day or week.

The Last or First Week of the Month

This is directly related to the quotas maintained at most car dealers and dealerships. While those numbers are often tallied by the end of the month, many dealerships will extend their quotas into the first week of the following month.
Generally, during these times, dealers are more likely to cut a deal or be more lenient in negotiation.

At the End or Very Beginning of the Calendar Year

If you have the time to wait until the holiday season to buy a car, you may be able to snag the best purchase price of the year.
That's because, at the end of the year, many dealers are focused on off-loading older inventory to make way for newer models on their lots. Similar to their monthly quotas, dealerships also often have yearly quotas to fill, which may result in a better deal.
Many people are also not as financially sound after their holiday spending. This makes the first few weeks of January a very slow time of year for most dealerships—and a good time to negotiate a better price on your car.

At the End of the Model Year

Dealers will also try to clear out old inventory once the new model year of cars are released. This is TYPICALLY near the end of the calendar year, though it may be earlier depending on the make and model. It's best to check a specific car manufacturer's website for the most accurate information on when a new model will be rolled out.
Watch out for cars with lots of design changes included in the new model. These will make the previous year model cars look even more outdated, and likely make dealers more eager to sell off the older cars.

When NOT to Buy a Car

Following the principal of supply and demand, it's generally more expensive to buy something when the demand for it is highest. For a new model of car, this would be right after it hits the market.
Springtime has also been a historically bad time of year to buy a car. With winter weather thawing, people are more likely to frequent outdoor shopping areas like car dealerships, and more people will have bounced back from big holiday spending, thanks in part to their tax returns.
Source : http://www.dmv.org/buy-sell/new-cars/best-times-to-buy-a-car.php
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Buying a Previous Model Year

Good things come to those who wait: it's not only your favorite phrase, it's your way of life. That's why you've decided to buy a previous year's car model.
But depending on your future plans, this idea may not be as savvy as it seems. Before you head to the dealership to make your purchase, check out all the pros and cons of buying a previous year model to make sure this choice is right for you.

Pros of Buying a Previous Model Year

Price

When most people think of buying a previous model year vehicle, the first benefit that comes to mind is price. It's true that many dealers will sell previous model year cars at a discount in order to make room for the newer cars coming in.

Trade-Ins

If you are trading in your old car at the time of purchase, this mindset may prove doubly beneficial. Since you already have a strong position in the negotiating process, it may be easier to bargain for a higher trade-in price on your old car.

Incentives

Dealers also like to offer incentives and rebates on previous year models to help them move the cars faster.

Cons of Buying a Previous Model Year

Still, there are some potential drawbacks to this method of buying a car.

Resale Price

While the purchase price will be lower than that of a new car, so will the resale price. As soon as the new model year is released, the resale value of a previous year model will depreciate more quickly.
If you are intending on owning the car for many years, this will not be an issue. But if you're unsure about your future plans for the car, proceed with caution. Remember, cars' values depreciate fast, especially within the first few years. A previous year model will already be considered a year old at the time of purchase.

Limited Options or Out of Fashion

This method is also not recommended for the aesthetically sensitive. Waiting to buy a previous year model often leaves you with less color options, and the new year's model may look drastically different, automatically signaling your car out as an older version.

When to Buy a Previous Model Year

You've reviewed the pros and cons and decided that buying a previous year model is for you. But now, depending on the time of year, you may want to wait a bit longer before pulling the trigger. There are certain times of year when buying a previous year model car will offer even more savings.

• July through October.
  • In general, this is when most of the new model years are rolled out. Dealers will be looking to make room on their lots for the most recent merchandise.
• Labor Day weekend.
  • The end of the summer plus the need to offload older models combine as a great excuse for many dealers to hold big sale events.
• December.
  • The holidays and end of the calendar year offer more good reasons for a dealer to throw a big sale.
  
  Source : http://www.dmv.org/buy-sell/new-cars/buying-a-previous-model-year.php
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New Car Taxes and Fees

Oftentimes, a car buyer negotiates what they feel is an amazing car price, only to get in the salesperson's office and find they're being charged more than the original agreement. Generally, this is due to additional fees and taxes.
Always ask the salesperson to explain these extra costs before you sign the contract. Keep reading for more information how these taxes and fees add up.

Dealership Fees

Some of the most common dealership fees include fees and costs for:

• Documentation:
  
  • The documentation fee, or “doc fee," basically covers the preparation and filing of all related paperwork, including the sales contract. Some states regulate doc fees; others don't.
• Advertising:
  
  • Sometimes, advertising fees are attached to the invoice price—and these fees can get tricky. For example, sometimes the manufacturer adds the advertising fee; in this case, it's probably best to pay it. Other times, dealerships add an advertising fee to offset advertising and other costs; in this case, it might be best to further negotiate.
• Trade-in:
  
  • The dealership might charge a fee to make your trade-in vehicle marketable. Some experts advise disputing this fee.
  • Furthermore, some states charge a sales tax only on the difference between your new car price and your old car's value.
• Warranty:
  
  • Most likely, the dealer will ask you to purchase a service protection plan (commonly called an extended warranty). This protection goes beyond the date or mileage when the manufacturer's warranty expires.
• Credit insurance:
  
  • Simply put, credit insurance covers the loan in the event you become disabled or pass away before the loan is paid off. To date, credit insurance is not required by law, so if you're interested in this insurance, check with your current insurance provider to make sure you don't end up paying double coverage.

Keep in mind, these are just some of the most common dealership fees. Always read the sales contract carefully and ask questions about any costs or fees you don't understand—or feel aren't warranted.

DMV Fees

As mentioned above, generally dealerships handle DMV-related fees -- such as title transfers and registration -- for you (until it's time to renew your registration, of course).

Car Sales Tax

Be prepared to pay a state car sales tax; this percentage depends on your state. Note that some areas also have county, city, and even school district car taxes, too. Your dealer will walk you through this process.
Unfortunately, dealership and/or manufacturer rebates and other incentives might not help you when it comes to lowering the cost associated with car taxes; some states charge the car tax on the full vehicle price before any rebates are applied.
Some states provide online car tax calculators or charts to help you get an idea of how much you'll pay. Refer to our Tax & Tags Calculator to see if your state provides this service.
NOTE: Many states require yearly property taxes on vehicles in order to renew your registration. For information specific to your state, contact your county clerk's or assessor's office.

Car Insurance or Financial Responsibility

Once you've paid your dealership fees, DMV fees, and all related car taxes, it's time to purchase car insurance or meet your state's financial responsibility laws.
Not all owners take this cost into consideration—and depending on your state, it can significantly increase the total amount you pay for your vehicle. For example, older model used vehicles might require only the state's minimum liability coverage; on the flip side, new cars might need both liability insurance and comprehensive and collision coverage.
Visit our section on Car Insurance to find your state's requirements and even shop for the best car insurance rates online.

Source : http://www.dmv.org/buy-sell/new-cars/new-car-taxes-fees.php
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Trading In a Used Car

You love your old car. Or maybe you hate it. Or maybe you love to hate it. But no matter how you feel about it, its time has come. It's time to purchase a new vehicle, and you're thinking about the trade-in value you could get from your used car. But before you send your used car off to the farm, there are some aspects of your car trade-in to consider.

What Is a Car Trade-In?

A car trade-in is a common transaction at new and used car lots. Most of the time, an owner will swap their old car in exchange for credit toward buying a new car from the dealer.
But just because you're trading in your old car doesn't mean you can stop paying for it. If you're still making loan payments toward your old car at the time of the car trade-in, you'll still be held responsible for the balance of that loan. However, it may be possible to cover that debt in the trade-in process.

How to Trade In Your Car

As with most things, knowledge is power when it comes to car trade-ins. Before making the transaction, it will be good to review not only what the used car value is to you, but also what it is to the dealer.

Determining Your Car Trade-In Value

There are several tools available for figuring out a fair trade-in price for your vehicle. The Kelley Blue Book (KBB) and the National Automobile Dealers Association (NADA) offer free online sources for determining the general trade-in value of your car.
Other factors will help you come up with a more accurate quote for your specific vehicle, including its:

• General condition.
  • Paint chips.
  • Dents or dings.
  • Pet or cigarette odors.
• Accident history.
• Timing and location.
  • Selling a convertible in the winter might be difficult.
  • Selling a convertible in Alaska might be even more difficult.

Get a Better Deal from the Dealer

To get the best idea of your individual car's trade-in value, take it to a few local dealers (perhaps 3 or 4) that sell similar vehicles. Don't sell yourself short by settling for the first offer you get.
You can make your car more attractive for a trade-in to a dealer in several ways:

• Make sure the outside is washed and the inside is clean.
• Bring any records of maintenance on your car.
• Let them know you have an idea of your car's trade-in value.

These factors can not only enhance your car's curb appeal, but also strengthen your negotiating position with the dealer.
 

How Dealers Determine Used Car Values

A dealer's mindset is likely much different than a seller's when it comes to used car trade-ins. A top priority for a dealer is how quickly they will be able to make their money back on the investment by reselling the car.
It also means most dealers will offer a price lower than many sellers' expectations, in order to turn a profit on the trade-in. Don't fall victim to “reverse sticker shock" by being overly sentimental about your old car.
On the flip side, if you are offered a higher trade-in price, it may mean that the dealer will try to sell you the new car at an inflated rate. Be wary of the price being offered for both vehicles. Learn what to pay for a new car here.
Dealers may also use slightly different sources for determining general trade-in values, such as the wholesale vehicle auction operator Manheim or the Black Book guide to used car prices.

What Matters to a Dealer

There are several other factors that most dealers will take into account when analyzing your trade-in, such as:

• Their current inventory.
• The car's model age.
  • A newer trade-in may fetch less money, as it could be competing against more new cars.
• Your vehicle's engine type.

Getting the Best Trade-In Value

Once you have all the information, you can start negotiating. Again, it's recommended to take your car to several local dealers before making this step.
If you have similar offers from several dealers, take your trade-in to the one where you want to buy your new car.
If none of your offers seem good, you can either:

• Wait for a special event at the dealership and try again.
• Try to sell the car yourself.

The Pros & Cons of Trade-Ins

Of course, a trade-in may not be the best option for you. There are several aspects of the process that might appeal to one person but not another. Consider all of the pros and cons before making the decision to make a used car trade-in.

Pros

Despite performing the advised research before making a trade-in, the process is typically faster and easier than selling a car on your own.
Things you WON'T have to worry about when making a trade-in:

• Taking out a for-sale ad for your used car.
• Meeting and feeling out potential buyers.
• Worrying whether a potential buyer will pay for the car.

The money you make can be put toward the new car you intend on buying. If you're still paying off a loan for your old car, and the remaining amount on the loan is less than what your old car is worth, it is possible to settle that debt with money from its trade-in value.

Cons

Generally, you'll be able to get more money for your car by selling it yourself. A great and easy way to do that is by using the Internet. Check out our guide to selling your car online for more details.

Source : http://www.dmv.org/how-to-guides/trade-ins.php
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Car Insurance Rating Factors and Your New Car

You did your research, loved the test drive, and feel good about the price tag. But before you drive that shiny new ride off the dealer’s lot, there’s one more price tag to consider.
Your car insurance premium is determined by many factors, and the kind of car you drive is one of them. Some cars, like family minivans, have stellar crash test results and accident histories, which can translate to car insurance savings if you’re swapping a sports car for a new minivan. The opposite is also true: Trading in Old Reliable for Flash Lightning can lead to an increase in your car insurance payments.
With this in mind, we’ll break down 5 key insurance factors to help you make an informed purchase.

1) Check on Safety Ratings

The Insurance Institute for Highway Safety (IIHS) is the leading authority on crash tests and safety ratings.
Visit the IIHS website to find out how your prospective new car fared in a battery of scientific crash tests.
The better your car scores with the IIHS, the happier your insurer will be. And happy insurers reward drivers through lower rates.

2) Your New Car’s Crash History

Believe it or not, insurers track the crash frequency of individual makes and models. Insurers are in the risk prediction business, and this is just another predictor of accident likelihood. Different types of cars and trucks also suffer damage differently: Some cars absorb a surprising amount of damage without requiring repairs, while a fender-bender in another car might require an entirely new front end.
So while you might sport a pristine driving record, your insurance rate might still increase if you buy a make and model with a high accident rate or a low threshold for damage.

3) Your Comprehensive and Collision Coverages

As a quick and slightly oversimplified refresher, comprehensive coverage (sometimes called “other than collision coverage”) can help pay to repair or replace your car after specific types of incidents like theft, vandalism, or single-car accidents. Collision coverage helps pay to repair or replace your car in the event of a (you guessed it) collision with an object or another car.
Because these coverages are specific to the make and model you drive, your new car will determine what you pay to keep them on your policy. If you were driving an old hatchback with an actual cash value of $4,000, your comprehensive and collision premiums were likely affordable because the most your insurer would ever have to pay (to replace the car) would be $4,000, minus your deductible.
Now imagine trading in that $4,000 ride for a car worth $34,000. Your insurance company now needs to consider the possibility that a total loss or theft could lead to a claim for $34,000. What you pay for the coverages might rise accordingly.
DMV.org tip #1: Most insurers are more than happy to talk through any of these scenarios before you buy that new car. So if you don’t like surprises, give your company a quick call to see how a change can affect your premium.

4) Damage Potential and Frequency: Liability Premiums

The IIHS also reports on claims frequency and severity by car size and type.
Generally speaking, bigger trucks and SUVs caused more damage than smaller ones, and smaller cars caused more damage than average-sized sedans.
If your new car is one that has a higher-than-normal claim frequency and severity, the cost of your liability coverage might increase.

5) Potential Discounts

If your new ride is chock full of the latest safety equipment, you might score a new discount on your car insurance. Same goes for anti-theft systems.
And if you’re adding a new car as the second car on an existing policy, you could score the frequently offered multi-car discount.
Check with your insurer to see what potential money-savers you could be in line for. If you plan on buying a car with poor safety ratings and a dicey accident history, these discounts could help offset any sudden increase in the cost of your policy.
DMV.org tip #2: If your heart is set on the new car and you find an increase in car insurance to be too high, don’t hesitate to shop for a new policy.


Source : http://www.dmv.org/buying-a-car-and-car-insurance.php
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Must-Have Dealership Incentives

Taking advantage of dealership incentives can help you to get the best deal possible on a new car. The hard part is knowing which incentives are available and how you can get them.
Since dealerships can profit from your lack of knowledge, it's important to do as much research as possible before you head out to buy a new car.
Below is a list of dealership incentives that you should always be aware of, along with tips for other hidden incentives you might need to pry out of that secretive salesman.

Top 5 Dealership Incentives

Manufacturers often give dealerships incentives to bring in new customers or move their inventory to make space for next year's models. As the buyer, you can take advantage of incentives to get a lower purchase price on the car you've been eyeing.
A few incentives that you should always be aware of include:

• Customer incentives:
  • An offer from the manufacturer directly to the consumer.
  • Can vary depending on region or dealership.
  • Usually will consist of:
    • Cash-back rebates.
    • Low-interest financing options.
    • Lower payments for leased vehicles.
• Factory-dealer incentives:
  • Given to the dealership from the manufacturer in order to:
    • Generate sales for specific models.
    • Move old inventory before new vehicles arrive.
    • Reach end-of-month or quarterly sales goals.
  • Dealerships are not required to pass these savings off to consumers, but if you're aware of these incentives, it can help you to negotiate a better deal.
• Sales incentives:
  • Given to dealerships from the manufacturer only when high sales goals are reached.
  • When dealers near these sales goals, you can often negotiate a lower price.
    • Since this can be hard to determine as a consumer, it's a good idea to request quotes from multiple dealers for the same model vehicle.
    • If one quote is much lower than the rest, it might be because they're getting close to a sales incentive.
• “New dealership" incentives:
  • Given to new dealerships from the manufacturer to lower prices in order to attract new customers.
    • If there's a new dealership in your region, visit them in person to see if you can negotiate a better deal than the one that's advertised.
• Dealership holdbacks:
  • An amount of money given back to the dealership after the cost of dealership inventory is paid to the manufacturer.
    • Usually a predetermined amount, generally ranging from 2% to 3% of the manufacturer's suggested retail price (MSRP).
    • Dealerships often list new car invoices without reflecting the holdback amount.

Dealer Incentives to Ask For

Some incentives, such as those offered from the manufacturer directly to the customer, aren't too hard to find as long as you do a little research. Others incentives can be more difficult—particularly those that are given directly to the dealership.
For you to get these savings, you'll be cutting into dealership profit. Because of this, dealerships are reluctant to make these incentives common knowledge. But, if you ask, you may be able to save yourself some money by negotiating a portion of these incentives.
Here are a few common incentives that will require further inquiry:

• Special incentive program availability:
  • Money given to the dealership to move slow-selling vehicles.
  • Since the dealership will profit more by selling these cars to you without the incentive (reduced price), you'll need to ask to the salesman for specific overstocked models that may qualify.
• Special plans:
  • Offered to specific segments of the population and may include low interest rates or cash back offers.
  • May or may not be advertised.
  • Ask the salesman or manager if a special plan is available for a specific model vehicle, particularly if you are:
    • A member of the military.
    • A retired veteran.
    • A school teacher.
    • A first-time buyer.
    • A repeat buyer from the same manufacturer.
    • A recent college graduate.
• Specialized car incentive programs:
  • Common incentive programs include:
    • A discount for vehicle exchanges, know as VEP.
      • Allows you to upgrade to a newer vehicle at a lower price by selling your car back to the dealership.
      • Helps the dealership increase stock of quality pre-owned vehicles.
      • Ask the salesman or manager if you own a vehicle that qualifies.
    • Cash back bonuses or rebates for hybrid or electric vehicles.
    • Special rates for customers returning leased vehicles.
  • Incentive programs can vary on a day-to-day basis, so be patient and ask around.
• Holdback percentage:
  • Since this can be a sneaky way for dealerships to increase profit margins, savings won't often be offered to the consumer.
  • The salesman may or may not profit from the higher invoice price, so ask the dealership manager to see if you can subtract a portion of the holdback amount from the overall purchase price.

Other Hidden Dealer Discounts

Often, the salespeople at the dealership are offered incentives themselves to meet quotas or to move slow-moving vehicles.
The salesperson may not offer these incentives or discounts to buyers, but you may be able to negotiate a lower purchase price, better financing, or other deals by asking the dealership manager for hidden discounts or rebates.

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Incentives

Using new car incentives to your advantage is a smart way to get a good deal. Most often offered through the manufacturer, an incentive can lower the overall cost of a car through a reduction in the terms of the lease or the finance interest rate. Although incentives are subject to eligibility requirements, if you have a decent credit score, it's possible to get a better deal.
The two most common types of manufacturer incentives are:

• Customer incentives.
• Dealership incentives.

Customer Vehicle Incentives

Customer incentives provide savings from the manufacturer directly to the consumer. These incentives often require potential buyers to purchase a vehicle before a specified date. Qualification is based on your credit score.
Common customer incentives include:

• Lease incentives.
  • These are based on residual value—the amount a car depreciates by the end of a lease, which is used to calculate monthly payments.
  • Research which manufacturers offer lease incentives for cars with a high residual value.
  • A higher residual value means the car will have less depreciation while under the leased contract, which will yield a lower monthly payment.
    • EXAMPLE:
    • You find a $20,000 car that will only be worth $5,000 at the end of a 3-year lease. Your monthly lease payment would be the difference in cost—$15,000—divided by the lease term—36 months— for a monthly payment of $416.
    • You find another $20,000 car that will be worth $12,000 at the end of a 3-year lease. Your monthly payments would be $8,000 divided by 36 months—$222.
    • Car #2 offers a higher residual value (less depreciation) and will result in a lower monthly payment.
• Cap cost reduction.
  • A manufacturer may offer cash back or other rebate incentives that will help to reduce the amount of money you'll need to finance a vehicle, which is known as a cap cost reduction.
    • Works the same way as a down payment on a loan.
    • Not a security deposit, but rather a form of pre-payment used to lower monthly payments.
• Finance incentives.
  • Usually consist of low interest-rate financing.
    • Interest rates may not be the entire length of the contract, so make sure you know the details beforehand.
    • The lowest interest rates are often reserved for shorter loan terms.
  • In general, a low Annual Percentage Rate (APR) is between 0% and 5%.
• Loyalty programs.
  • These provide deals for specific customer types, such as:
    • First-time buyers.
    • Recent college graduates.
    • Military members.
    • Repeat customers.

Dealer Vehicle Incentives

Unlike customer incentives, manufacturers provide incentives to dealers as motivation to sell more cars. Most dealer incentives are offered by region, which means that purchase prices can vary from one dealership to another on the same vehicle.
Though the dealer is under no obligation to offer these savings to potential buyers, you can usually negotiate a lower sale price by doing a little research beforehand. Dealerships are usually given incentives based on:

• Inventory stock.
  • Dealers pay for inventory.
  • Negotiating a lower price is easier the longer the vehicle has been on the lot.
• Sales goals.
  • Incentives from automakers sometimes begin once a sales goal is reached.
  • Each additional sale after a sales goal often results in a higher incentive for the dealer.
    • Easier to negotiate a lower purchase price.
• End-of-year models.
  • New inventory decreases the value of last year's models.
• The number of new customers.

Tips to Get the Best Incentives

While customer incentives are normally heavily advertised on TV and online, some incentives such as those offered through a dealership can be hard to find. Not only do they vary by region, but incentives also constantly change.
To get the best deals, it's important to do as much research beforehand as possible. The more you know, the better the deal you're likely to get.
So before you head to the dealership, use these tips to get the best deal possible:

• Negotiate the price of the car before you mention any incentives.
  
  • This will help to drive the total cost as low as possible.
• Research incentives in your area for multiple manufacturers.
  
  • If a competitor has a better deal advertised, it can help you drive down the price.
• Search websites such as Kelley Blue Book that provide a list of the best incentives for the current month.
• Look for models that are at the end of their production cycle.
  
  • Last year's models lose value once new models arrive.
  • Dealers will offer good deals to move them as quickly as possible.
• If your finances allow it, work a cash deal.
  
  • Dealers will often lower the sale price with more cash upfront.
• Try to make your purchase at the end of the calendar month.
  
  • If dealers have too much inventory, they are likely to try to move their stock quickly, and may have incentives to do so.
  
  
   Source : http://www.dmv.org/buy-sell/new-cars/incentives.php
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Researching a New Car

Getting a new car is an exhilarating experience, but the responsibility involved in picking the best new car for you can be overwhelming. Luckily, there are a number of websites, databases, and companies dedicated to making the process of buying a car much easier.

 

New Car Quality Ratings

“Quality" is a broad term, and can be interpreted in many ways. J.D. Power and Consumer Reports are industry leaders in quality studies and test the quality of new cars from a number of different perspectives, listed below.

Types of New Car Quality Assessment

• Customer satisfaction.
  • The J.D. Power U.S. Automotive Performance, Execution and Layout (APEAL) Study highlights which aspects of a new car an owner is happiest with after 90 days. It focuses on performance and design.
• Customer dissatisfaction.
  • The J.D. Power Initial Quality Study (IQS) assesses owner-reported problems within their first 90 days of owning the car.
• Dependability.
  • The J.D. Power Dependability Ratings takes a longer view on owner-reported problems by vehicle, seeing which cars hold up better over time.
• Fuel economy.
  • Consumer Reports has tested for the most—and least—efficient cars when it comes to gas mileage.

New Car Safety Ratings

For many new car buyers, safety is one of the most important issues to consider. You are precious cargo, and your family, friends, and pets are, too.
There are a few different agencies out there doing major safety tests on new cars—most prominently, the National Highway Traffic Safety Administration (NHTSA ) and the Insurance Institute for Highway Safety (IIHS). Both groups can be great resources when doing research on a vehicle's safety.

The NHTSA

The National Highway Traffic Safety Administration (NHTSA) is a government agency that issues a 5-Star Safety Rating based on how a new car performs in a crash test. The rating examines, among other considerations:

• Front crash.
• Side crash.
• Rollover resistance.

Starting in 2011, the NHTSA tweaked their tests to incorporate differently sized dummies and collect different crash data. They typically test new cars that are predicted to sell in high volume.

The IIHS

The Insurance Institute for Highway Safety (IIHS) is a private nonprofit organization that was founded by auto insurance agencies. They issue Top Safety Pick designations for new cars based on how they perform in crash testing.
Specifically, the agency examines:

• Crashworthiness—how well a vehicle protects its occupants in a crash.
  AND
• Crash avoidance—how a car's technology can help prevent or mitigate a crash.

New Car Features

A new car will come in different versions, depending on the number and type of features it incorporates. Most manufactures will offer a base model, which includes just the basic necessities of a car.
Typically, the more upgrades made to the base model, the higher the price of the car. Some features that may ratchet up a new car price include:

• Leather interior.
• Heated/air conditioned seats.
• Built-in entertainment systems.
• Sun/moon roof.
• Latest technological trends.
• Push-start.

When considering how the features you want in a new car may affect its cost, it's best to check the manufacturer's website for the most accurate price estimates.

The New Car Market

Supply and demand wields a huge amount of influence over the price of everything, including new cars.
A new car will be the most expensive right after it rolls onto the market, especially if it's a popular model. But there are a few ways to skirt around paying a premium price for a new car:

• Buy an out-of-season car.
  • E.g. purchasing a convertible in the winter.
• Wait until the end of a “model year" to buy a new car.
• Seek out new car incentives and rebates.
• Buy a new car on the last day of the month.
  • Most dealers have monthly sales quotas.
• Buy a new car at the end of the calendar year, when many dealers are trying to clear their inventories.

For other tips and tools to ensure you're getting a good price, check out our guide to buying a new car.

New Car Reviews

Another good way to research a new car is by learning from the experience of others. There are plenty of expert reviews online to choose from. Two good sources are the Kelley Blue Book and Consumer Reports.
Hearing what actual new car owners have to say is another great way to get perspective. User reports often highlight the quirks of a specific car that you won't hear about from a dealer or read on a manufacturer's website.
You can scan the web for thousands of new car owner comments. Edmunds provides a database to search what people have to say not only about their new car, but about new car dealers, as well.

Where to Buy a New Car

You don't just have to rely on the dealership down the street for your new car purchase. Once you've decided on which car you want, there are several ways to begin the hunt for it, including:

• Direct buying services.
  • New car buyers can enlist the help of an expert. These professionals will take care of everything from finding a new car to delivering it to your house.
• Manufacturer's websites.
  • If there's a specific type of car you have in mind, the manufacturer's site may include a dealer referral service, which will point you in the direction of a specific dealer in your area.

You can also use programs like the Kelley Blue Book quote tool to get an idea of which dealers within your zip code have the make and model you want.
It's recommended to visit several dealers to get the best price quote on a new car. If you want to buy a car on a subsequent visit, it's recommended to call ahead to ensure the dealer still has the vehicle you want.

Test-Driving Your New Car

Everyone has different preferences, which is why an important part of researching a new car is your own experience, feelings, and insights. The best way to acquire these traits is by test-driving a new car you're interested in buying.
Some key factors to keep in mind during your test drive include:

• General fit and comfort.
  • Does the car feel comfortable for your specific body type? Does it have enough legroom? Can you easily reach all pedals and controls?
• Visibility.
  • Check to make sure you can read every gauge and easily see in the rear and side view mirrors. Make sure to test for any potential blind spots.
• Acceleration and pick-up.
• Engine noise.
• Steering and handling.
• Suspension.
• Breaking ability/smoothness.

Once you've applied your research to make the best possible choice, check out our guide to buying a new car to learn how to bring your perfect new vehicle home.

 Source : http://www.dmv.org/buy-sell/new-cars/researching-new-car.php

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With cars becoming more and more available for purchase online, it can be hard to decide whether you want to purchase your car over the Internet or go the standard route by visiting a dealership.
Keep reading to learn more about each shopping option in order to make an informed decision.

Buying Online or at the Dealership

Buying a Car Online

There are two ways to approach online car dealership shopping:

• Direct online sales.
  OR
• Dealership aggregators.

Direct from Dealer

Several dealerships now have online sales departments. The entire purpose of these teams is to sell cars to their website visitors.
To take advantage of this service, simply ask the dealership for a quote on the car you are interested in buying directly from their website. The dealership will e-mail you back with its offer. Some dealership websites even offer live chats with online salespeople.
You can also ask for the dealership to list out all the fees so you can get an exact sense of the total cost of the car. Go through this process with multiple dealers and you will be able to see who offers the best price without ever leaving your home.

Dealership Aggregators

Most of the big name online car marketplaces are considered dealership aggregators. Dealerships throughout the country use such sites to list their inventory.
Through these sites—such as autotrader.com—you can search for the car you want and find several results within your vicinity, or even throughout the country. With so many results at your disposal, comparing prices can be exceptionally easy.

Cons of Buying Online

Shopping online for the best deal on a new car and reducing your time at the dealership sounds ideal for most people. However, there are some instances when buying a car online can be more complicated. Here are some pitfalls to avoid:

• Out-of-state dealerships. Buying a car out-of-state isn't necessarily a bad thing, but you should keep in mind that the car registration and titling process can be more complicated than if you were buying in your home state.
• No test-driving. If the dealer with the best online price is too far for a trip, are you comfortable taking the risk of never having driven the car?

Buying at a Dealership

Online shopping is great, especially when you know exactly what car you want. However, when you don't know what car you want or prefer to test-drive different models and see how they feel, visiting a dealership in person might be a better option.
While car salespeople are stereotyped as being pushy, the truth is there are very knowledgeable salespeople who can be quite helpful if you need assistance evaluating different cars. They will answer your questions and have first-hand information on the cars they sell.
Don't forget the value of test-driving. When you are at the dealership, nothing beats getting to know a car more than a test-drive.

Cons of Buying at a Dealership

Before making the trip, consider these disadvantages of buying your car from a dealership:

• Pushy salespeople. While it's unfair to call all car salespeople pushy, you might run into a dealer who will be aggressive in trying to sell you a car that isn't necessarily the best choice for you.
• Difficult to comparison-shop. Traveling between dealers to compare cars and prices can be more difficult than making quick comparisons online.

The Right Option for You

The truth of the matter is buying online or at a dealership is going to depend on your shopping preference. Each has its pros and cons. Keep in mind that there is nothing stopping you from doing both!
Buying a car is a big deal. Using every resource available to you can help put you behind the wheel of the car you want at the price you want to pay.

Source : http://www.dmv.org/buy-sell/new-cars/buying-online.php
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Guide to Buying a New Car

This article is for general information about buying a new car only. If you need specifics on the process or paperwork required in your state, please refer to our Title Transfers or Paperwork When Buying a Car page.

Buying a new car can be considered one of life's natural highs. Who doesn't love that new car smell? But moving that shiny new vehicle from the dealership to your driveway can be a daunting process. This guide will help break down where to go, what to do, and how to think about securing a new ride.

Why Buy a New Car?

Between errands, commuting to and from work, or for simple recreation, the average American spends a lot of time in the car. With this in mind, it is easy to see why it is so important to spend that time in a car you like. If you've been driving the same car for decades, it might be time for an upgrade, or maybe you need to replace your unreliable old car.

Researching Your New Car

Prioritize Your Wish List

Before taking the plunge, think about what you want in your new ride.
Some key things to keep in mind:

• Features you need vs. features you want.
  • Great sound system? Lots of leg room? Automatic door opener? The choice is yours.
• Safety.
• Reliability.
• Your monthly budget.
• “Hidden" costs.
  • E.g., depreciation rate, insurance, average miles per gallon.

Do the Research

Once you've decided what you want in your new car, see what some of the industry leaders have to say:

• For safety reports and Government 5-Star Safety ratings, check out the National Highway Traffic Safety Administration (NHTSA) website.
• The J.D. Power Circle Ratings are a good place to analyze vehicle quality.
• Expert opinions at Kelly Blue Book are a helpful guide.
• Scan the web for owner opinions.

Determining Your Budget

Chances are if you are paying for your new car in full, you know exactly how much you can afford. However, if you are like most car buyers who need to take out an auto loan, you're going to have to think a little harder about your budget.
First, it's important to determine what you can afford to pay each month. Keep in mind that you won't just be paying for the car itself, but you'll most likely be putting money toward taxes and title and registration fees that would be included in the total loan.
It's also useful to think about down payments vs. financing rates, as well as the initial costs, recurring costs and potential other costs involved in owning a car.
Generally, a good rule of thumb is to spend no more than 20% of your monthly income on a car loan payment. Of course, this number could vary. If you already have a lot of debt, you may need to budget based on a very small portion of your monthly income.
For more details about budgeting for your car, visit our guide to Creating a Car Budget.

Negotiating Your Deal

Arming yourself with information will undoubtedly help in the purchasing process. When buying a new car, the price is almost always up for negotiation. It's recommended to request price quotes from at least 3 local dealers to feel out the market.
You can also use your knowledge of vehicle pricing factors along with bargaining chips, such as trade-ins and pre-approved loans, as leverage for your negotiations.

Price Factors

New cars are priced according to several different indexes. Knowing the differences between each one can help you in the negotiating process.
Your new car's price tag may include:

• Invoice price—What the dealer pays for the car. It could give you an idea of the salesperson's lowest possible price point.
• Manufacturer's Suggested Retail Price (MSRP)—The price set by the manufacturer. This is a “suggested" price.
• Fair Purchase Price (FPP)—Reflects the going market rate or price range of the car. This number is updated weekly.

Trade-Ins

It's possible to shave some money off of your new car price by trading in your old vehicle to the dealer. However, there are pros and cons to this method.
Oftentimes, a dealer will offer less money than the car could fetch on the open market. On the other hand, it's typically faster and easier to trade a car back in to a dealer – plus, they'll do all the paperwork for you.
When considering a trade-in, make sure you research the value of your current car. The Kelley Blue Book is a great place to start.

Pre-Approved Loans

A pre-approved loan is another great bargaining chip when negotiating the price of a new car. Walking on to the new car lot with a loan from a bank, credit union, or online lender will let you know the interest rate you qualify for and let you negotiate as a cash buyer.
Keep in mind, by letting you walk out the door with a pre-approved loan, a dealer is essentially letting money walk out the door.

Completing Your Vehicle Purchase

Congratulations! You're almost a new car owner. But before you ink the deal, make sure everything is up to snuff. Give these last few considerations a double-check:

• Check the car for dents or scratches.
• Ensure all numbers on the contract are correct.
• Make sure all the all equipment – including floor mats and owner's manuals – is included.
• Your new car should come with a full tank of gas.

This will also be your chance to purchase additional features, such as an extended warranty.
Most of the time, a dealer will be required to file all the appropriate paperwork for you, but it's good to make sure your registration and titling are correct, and to prepare for any other DMV forms you may need.

Source : http://www.dmv.org/buy-sell/new-cars/buying-new-car.php
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Learn how to find the perfect used or new car. Our guide for car buyers provides tips for those shopping for a car.

Car Shopping Resources

In This Section

• Kelley Blue Book & AppraisalThe Kelley Blue Book is one of the most trusted resources when it comes to determining the value of a car. Learn how you can use the KBB when selling or buying a car.
  
• Considering Resale ValueMake sure that you are making a good investment with our resale value guide.
  
• Creating a Car BudgetCreate a car budget to help you get an auto loan with monthly payments you can afford.
  
• How To Avoid Showroom AnxietyDo car salespeople make you nervous? Here are some great suggestions on how to remain calm in the showroom.
  
• How To Take A Test DriveReady to take a test drive? Here is a guide to help you get the most out of the test drive experience.
  
• How To Get A Vehicle History ReportOrder a vehicle history report before buying or selling a used vehicle. Obtain a VHR online & review title history with a few simple clicks.
  
• Getting A Good DealWondering what the current value of your vehicle is? Find out with our car value guide.
  
• Lemon Law ReviewLemon law information & articles - find out if your car meets the definition & what consumer protections you have.
  
• How To Buy Car InsuranceCheck out our comprehensive guide to buying car insurance - tons of valuable information to help you make the right choice .
  

Source : http://www.dmv.org/buy-sell/learning-center/

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Car Donation Scams

Many people donate cars to charity and take advantage of tax write-offs; unfortunately, they often don't know the warning signs of car donation scams. Read on for information on how you can make sure your car donation is put to the best use, all while protecting yourself and your tax interests.

Types of Car Donation Scams

Generally, car donation scams occur when you donate a car to a disreputable charity that engages in such practices as:

• Using a dishonest intermediary agency (or a “middleman") to collect the vehicle.
• Allowing the middleman to keep the vehicle or most of its worth.
• Isn't designated as a tax-exempt charitable organization.

Of course, car donation scams aren't limited to the above. Avoiding charity scams means being proactive about informing yourself and picking out the best car donation charity for your needs.

How to Avoid Car Donation Scams

Take these tips into consideration before you donate a car.

1. Research the Charity

Today, researching car donation charities is fairly easy; in fact, the Internet makes researching charities a nearly immediate process.
Some charity research resources include:

• Better Business Bureau
• Charity Navigator
• GuideStar

These organizations help you determine whether a car donation charity is reputable—often, they even include any issues and resolutions others have had with the charity.
Of course, you can always do some groundwork, too. For example, talk to others who have experience with car donation. Which charity did they use? How complicated was the process? Does the charity work with local area needs (which might be easier to evaluate), or is it a national organization?

2. Donate Directly to the Charity

Often, car donation scams use middlemen, and these middlemen take a cut of the donation.
Simply put, this means the middlemen (or “intermediary agencies") and the charity each take a chunk of your donation, and the actual recipients of the donation (those folks in need) get what's left. Whenever possible, donate directly to the car donation charity; your donation goes farther and has more impact when you do.
Additionally, when you donate a car for a tax write-off, you benefit more if a higher percentage of your donation goes directly to the charity. Remember to keep records and always talk with your tax professional about your charitable car donation.

3. Check for Approved Charity Status

More reputable car donation charities hold a 501(c)(3) status with the Internal Revenue Service (IRS), and the charity must have this designation if you want to donate a car for tax write-off purposes.

• You can check for 501(c)(3) status by:
• Asking to see the charity's IRS tax exemption letter.
• Using the IRS' online Exempt Organization Select Check.
• Calling the IRS at (877) 829-5500.

While these are the most direct ways to check for 501(c)(3) status, you might also find the information when you research the car donation charity using the websites listed above.

4. Always Sign the Vehicle's Title

Sometimes, car donation scammers will tell you that you're not authorized to sign the title; they'll say authorized personnel at the charity's office must sign the title.
This is not the case; in fact, the IRS recommends you sign the title (or transfer the title) before donating the car. While it's not illegal for a car donation charity to have an “open" vehicle title, you remain responsible for all fees related to taxes, licensing, and registration until the title is properly signed over to the charity.

5. Look for Local Car Donation Charities

It's much easier to see your car donation at work when you donate to local charities; ideally within your community, but at least within your state.
Of course, you shouldn't donate a car to a local charity just because it's local (keep all the above tips in mind, too!), but local charities develop reputations among community members, and these reputations can help you determine whether the charities are known for scams.

What to Do if You've Been Scammed

If you've been the victim of a car donation scam, report it to your state government.
Contact your Attorney General, or your state government's consumer fraud investigation division. A representative will advise you on how to move forward.
Alternatively, you can contact the Federal Trade Commission (FTC) Bureau of Consumer Protection and file a complaint online.

Source : http://www.dmv.org/buy-sell/donate-car/car-donation-scams.php
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California Vehicle Retirement

California's Voluntary Accelerated Vehicle Retirement Program (VAVR)—also known as the car scrap or recycling program—aims to get California junk cars off the highways by providing cash incentives to drivers in order to purchase newer, more fuel-efficient vehicles

California VAVR Requirements

Generally, your vehicle must fail the smog check before it's eligible for the VAVR program, and that failure must not be due to:

• Ignition timing adjustment.
• Failed gas cap functional test.
  OR
• Tampered emissions control system.

In some cases, your vehicle might be eligible for a local air district program without having failed the smog test. See VAVR Program District Information below.
California provides an extensive list of additional requirements for its vehicle retirement program; for example, the vehicle:

• CANNOT be undergoing a first-time registration, re-registration, or title transfer.
• Must be registered and titled in your name.
• Must have:
  
  • A valid registration sticker.
    OR
  • Have all DMV fees paid and NOT have a registration that has been expired longer than 120 days during a period of 2 years.
• Must be a passenger car, truck, van, or sports utility vehicle (SUV) with a gross vehicle weight rating (GVWR) of 10,000 lbs. or fewer.
• CANNOT be registered to a fleet, non-profit organization, or other business.
• CANNOT be a salvaged or dismantled vehicle that's not re-registered with the DMV.

However, there are a few different requirements for low-income vehicle owners. For example, an individual must first qualify as a low-income car owner, meaning the household income is 225% of the federal poverty level or less.
Regardless of income status, you can only recycle the following within a period of 12 months:

• 1 vehicle if you're the sole owner.
  OR
• 2 vehicles if you're a joint owner.

Each vehicle must meet specific equipment and operational requirements.
The state's Consumer Assistance Program provides a full list of requirements for California's car recycling program.

VAVR Cash Incentives

Currently, the cash for junk cars incentives are simple:

• Basic: $1,000 per vehicle.
• Low-income: $1,500 per vehicle.

Local Air VAVR District Information

Even if your vehicle passed its smog test or isn't subject to one, it might still be eligible for a local air district VAVR program.
Currently, the following districts offer such programs:

• Antelope Valley.
• Mojave Desert.
• Bay Area.
• San Luis Obispo County.
• Santa Barbara County.
• South Coast.

For more information about each district's requirements and contact information, visit the state's page on District VAVR Program Information.

VAVR Processes & Forms

If you're planning on scrapping a car through the VAVR Program, you must:

• Check your vehicle's eligibility. Refer to the state's Vehicle Retirement Requirements (Revised June 2015) document for information.
• Complete a Consumer Assistance Program (CAP) Application (CAP/APP ).
  
  • Mail the completed application to the address listed on the form.
  • If you believe you meet low-income eligibility requirements, refer to state's Household Income Information (CAP/ER). You must include any required paperwork with your CAP application.
• Wait for your determination letter or Letter of Eligibility, which will let you know whether your vehicle qualifies for the scrap car program.
• If approved, bring your vehicle to an authorized dismantler before the expiration date indicated on your Letter of Eligibility.
  
  • Make sure you bring your vehicle's valid title. If your title is altered, contact the dismantler for further assistance before bringing your vehicle in.
  • All registered owners must be present; otherwise, a Power of Attorney is necessary.
  • All registered owners must bring photo identification.

Once your vehicle passes the equipment and operational inspection, the dismantler will issue you a check for the appropriate amount. You are responsible for finding your own way home.
NOTE: California also provides all required applications and documents in Spanish.

Additional CA Car Scrapping Information

For more information about California's VAVR Program, contact the Bureau of Automotive Repair (BAR) at (866) 272-9642 or visit the Consumer Assistance Program (CAP) website.

Source : http://www.dmv.org/buy-sell/donate-car/vehicle-retirement.php
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Car Donation vs. Cash for Junk Cars

Most of us have been there: We have a “junk car" we can't, don't, or won't drive anymore, but we're not sure what to do with it.
Rather than trying to pawn your car off on someone else for what little amount of “blue book" value it might have, consider the pros and cons of charity car donation vs. getting cash for your car.

Car Donation

Pros of Car Donation

When you donate a car to charity, you can:

• Make a charitable contribution to your community, or a community in need.
• Often take advantage of tax deductions.
  
  • Generally, the charity must have a 501(c)(3) status or be a religious organization in order for you to make a tax-deductible car donation. Ask the charity to see such documentation, or use the Internal Revenue Service's (IRS) EO Select Check to determine whether the charity has a 501(c)(3) status. Always work with a tax professional when it's time to file your tax deductions.
• Find ways to make use of those “other vehicles" just collecting dust such as motorcycles, boats, and other recreational vehicles.
  
  • Learn more in our section on Other Vehicle Donations.
• Usually have the vehicle picked up for free.
  
  • This depends on the charity you choose.

Cons of Car Donation

As wonderful as charitable contributions feel, there are some downsides to making a car donation vs. getting cash for cars.
For example, when you donate a car, you could:

• Fall prey to car donation scams, which often take away a good part of the money meant to help the charity (if the charity even exists).
  
  • Learn more in our section on Car Donation Scams.
• Walk away without cash in hand.
  
  • Aside from tax deductions, there is no financial incentive for donating a car to charity.
   

Cash for Junk Cars

Pros of Getting Cash for Your Car

If you're skeptical about car donation, maybe getting cash for your car is the better option.
Some pros to choosing cash for junk cars include:

• You get cash!
  
  • Whether you choose a formal “cash for cars" program or sell your car to a junkyard, you get money in your pocket.
  • Sometimes, this cash acts as an incentive to purchase a newer, more fuel-efficient vehicle.
• Generally, you help get emissions-polluting vehicles off the highway.
  
  • Most cash for junk cars programs or junkyards don't put these vehicles back on the roads.
• Possibly having the vehicle picked up for free.
  
  • This depends on the program or junkyard you choose.

Cons of Cash for a Junk Car

However, taking the cash for junk cars route isn't best for everyone.
For example, getting cash for cars:

• Gives up your tax deduction option.
  
  • You can't make a tax deduction on a vehicle you sell; in fact, it might add to your income reporting requirements. Speak with your tax professional before making a decision.
• Means you have to find a way to transport your junk vehicle.
  
  • Again, this depends on the program or junkyard, but if neither offers a free pick-up program and your junk car doesn't run, you face towing responsibilities
 

Source : http://www.dmv.org/buy-sell/donate-car/vehicle-retirement.php

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Cash for Clunkers

The “Cash for Clunkers" program (formally known as the CARS Allowance Rebate System, or simply CARS), was designed to encourage drivers to trade in their old, gas-guzzling vehicles for cash to purchase new, more fuel-efficient models. Although the program officially ended in 2009, there are still ways drivers can get cash for junk cars.

CARS Program Timeline

The CARS Allowance Rebate System (CARS, or “Cash for Clunkers") began in July 2009 and was scheduled to run through November 1, 2009, but reportedly ended in August 2009, once funds were exhausted.

Finding Current Cash for Junk Cars Programs

Although the CARS program is currently over, car owners still can find ways to turn their junk cars into cash.
For example, many cities and local car dealerships offer similar car retirement programs and pay money for recycling vehicles. Generally, all it takes is a quick Internet search or browse through the phone book to find similar car recycling programs. Additionally, many dealerships run advertisements for such “cash for junk cars" programs, often offering rebates or similar incentives for buyers who trade in their junk cars for newer models.

About the CARS Program

Simply put, the CARS program was a billion-dollar incentive for drivers across the nation to scrap their junk cars and purchase new, more fuel-efficient vehicles. The primary goals of the program was to:

• Get environmentally unfriendly cars off the road.
• Boost the economy by promoting car sales.

Once the vehicle met the eligibility requirements, the vehicle was surrendered for scrap and the dealer submitted an application for credit at the time of the new vehicle purchase. The dealer would disclose an estimate of the scrap value, and that estimate was in addition to any rebate—NOT in place of a rebate.

Cash for Clunkers Eligibility

Only certain vehicles and situations were eligible for the Cash for Clunkers program.
The vehicle must have:

• Been fewer than 25 years old.
• Averaged less than 18 MPG (though some large trucks and cargo vans had different requirements).
• Been registered and insured for at least one year preceding the trade.

Also, owners must have used the trade-in to purchase or lease a new vehicle.

Results of Cash for Clunkers

Once CARS had ended, many debated on whether or not the program was successful. While Cash for Clunkers certainly did succeed in its goals, critics are quick to point out that it came at a great cost (several billions of dollars) to taxpayers.

Alternatives to CARS

As mentioned above, drivers can find similar vehicle retirement programs offered by their cities or local area dealerships; however, there are additional car recycling methods.
For example, owners might consider selling their vehicles to junkyards. These establishments buy junk cars for parts, or scrap them for recycling at other establishments such as steel mills.
Of course, if your vehicle is still in good working condition and you aren't necessarily looking for cash, you might consider donating your car. For more information about this process, visit our section on Car Donation.

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Other Vehicle Donations

Regular passenger vehicles such as cars and trucks are among the most common types of vehicles people donate; however, they're not the only vehicles charities accept.

Types of Vehicles for Donation

In addition to regular passenger vehicle donation, many charities look for vehicles other than those considered “standard"; these include:

• Boats.
• Motorcycles.
• Recreational vehicles (RVs).

Specialized Vehicle Charities

Specialized vehicle charities exist across the country; it's a matter of finding one near you that accepts the non-standard vehicle you wish to donate.
Thanks to today's technology, you can start with a quick Internet search. You can also ask family members, friends, neighbors, and even co-workers about any other types of vehicles they've donated to charity.
Just remember to check out the charity's tax-exempt status if you plan to make a tax-deductible donation (see IRS & Other Tax Requirements below for more information), and refer to our page on Car Donation Scams to make sure you don't fall prey to a scam for donating any type of vehicle.

Determine Your Vehicle's Value

Determining the value of your other vehicle can be tricky. While many folks look to the Kelley Blue Book (KBB) for the value of their vehicle, the KBB doesn't provide values for non-standard vehicles such as boats, motorcycles, and RVs.
Plus, sometimes this value isn't the exact “fair market" value—which is what the IRS looks for when it comes to charitable donation.
Fortunately, the IRS provides a helpful guide on determining the fair market value of your donated property. For more information, you can also visit our page on donated vehicles and tax deductions.

IRS & Other Tax Requirements

You must donate your vehicle to a tax-exempt charity or organization if you want it to qualify as a tax-deductible donation. Most commonly, these types of organizations have a 501(c)(3) status that the IRS refers to as “charities." Ask the charity to see its 501(c)(3) documentation before donating your vehicle for a tax deduction. You can also check the IRS's EO Select Check to find tax-exempt organizations.
Once you determine the value of your vehicle and make your donation, you must obtain required documentation for your tax deduction. Such documentation includes, but might not be limited to:

• Written acknowledgement from the charity.
• Noncash Charitable Contributions (Form 8283).
• This form is for donations exceeding $500.
• Written appraisal from a qualified appraiser.

Understand that any tax-deductible donation might come with special IRS requirements specific to the situation. Play it safe and speak with your tax professional both before you make the donation and when it's time to file your taxes.
Check out the IRS's pamphlet on A Donor's Guide to Car Donation to learn more about your charitable tax-deductible donation.

Exceptions to the Rule

Not all charitable organizations are required to have a 501(c)(3) status for you to make a donation tax deduction; such examples include religious organizations. For specific information about charities you don't see listed, or that can't provide documentation, contact the IRS at (877) 829-5500.

Source : http://www.dmv.org/buy-sell/donate-car/other-vehiclesphp.php (copy link into your browser)

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Tax Deductions & Car Donations

Taking a tax deduction for your car donation to charity isn't very different from any other gift to charity. Accurate paperwork is key when listing all gifts at tax season. However, car donations are a little more complicated than most charitable gifts because the value of the car determines the specific form that must be filed with the IRS—and the value of the car is not always obvious.

Filing a Car Donation Tax Deduction

When you file your annual U.S. Individual Income Tax Return (Form 1040), you will need to itemize your deductions for your charitable gift deduction(s) to be counted. The charity will provide you with an acknowledgement that describes the gift. That acknowledgement must be filed with your Form 1040. Additional steps may be necessary based on the value of your car.

• If you donated a car worth less than $250, simply keep a record of the gift in your files.
• If you donated a car worth $250 to $500, keep a record of the gift in your files and get an acknowledgement of the gift from the non-profit.
• If you donated a car worth more than $500 but NOT more than $5,000, you will also need to file a Noncash Charitable Contributions Form 8283 and complete Section A.
• If you donated a car worth more than $5,000, you will need to file a Noncash Charitable Contributions Form 8283 and complete Section B. A written appraisal of your car from a qualified appraiser is also required.

A complete description of the IRS requirements is available in their handy guide.

Requirements for Your Records

Your records should include the following:

• The name and address of the charity.
• The date of the donation.
• The place where you donated the car.
• A description of the car.

Determining Your Correct Value

How much you can deduct for your vehicle depends on how the charity treats your vehicle once you've donated it—i.e. whether they sell it for gross proceeds, or they use it for some other purpose, in which case you would use its fair market value.
The charity will be required to tell you whether or not your deduction should be based on gross proceeds or fair market value. The rules are also nicely detailed in the IRS guide.

Gross Proceeds

When you donate your car to charity and the charity sells your car—which is what happens in most cases—the value of your car donation is the gross proceeds the charity received when they sold your car. This amount will be listed in the acknowledgement the charity gives you and will become the amount of your deduction.

Fair Market Value

There are exceptions to the gross proceeds rule; these include:

• The charity plans to use the car.
• The charity is going to make significant improvements to the vehicle.
• The charity plans to sell or give the vehicle to someone in need for a value less than the fair market value.

In the case of an exception, you can deduct the fair market value of your car—the price at which you could sell your car to a private party (not a dealership).
To calculate the fair market value of your car, start with its book value. Services like Kelly Blue Book offer online calculators that help assess the book value of your car. This is a good place to get a general understanding of how much your car is worth.
Once you have a good estimate for the book value, then you can determine the fair market value. Did the calculator take everything into consideration? For instance, are there expensive repairs needed that decrease the value of your car? If so, you must deduct that from the book value to approach the fair market value.
NOTE: If the statement from the charity indicates that the car was sold for $500 or less, you can deduct the lesser amount of either:

• The fair market value.
  OR
• $500.

Car Donation Examples

To help clarify the donation and deduction process, here are a few examples of some general scenarios that could happen when someone donates their vehicle to a charity.

EXAMPLE 1

Sally donated a car to her local animal rescue organization. She looked up the book value of her car online, and it was worth $1,800 in a sale to a private party. Her car was in pretty good shape, but needed $500 of bodywork completed. Therefore, the fair market value of her car was $1,300.
Sally kept a record of her research on the value of her car, the information about the non-profit, and her gift to them. She received a letter from the charity acknowledging her gift worth $1,300 and informing her that they planned to use her car for a year to pick up and deliver abandoned or sick animals. The charity also acknowledged that they wouldn't sell the car for at least a year.
When Sally filed her taxes the following spring, she itemized her deductions, including her $1,300 car gift. She also filed Form 8283 with Section A completed, along with the acknowledgement from the charity.

EXAMPLE 2

Gina donated her car to a local shelter that assists the homeless. Gina's car was worth $7,000, but the charity sold it for a gross proceed of $5,500—therefore, Gina's deduction cannot be more than $5,500. She also filed Form 8283 with Section B completed, along with the acknowledgement from the charity.

Source : http://www.dmv.org/buy-sell/donate-car/tax-deductions-and-car-donations.php (copy Link into your browser)

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