CARS

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

2. 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

3. 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

4. Progress by NHTSA • Web site established June 19: www.cars.gov; basic information and frequent updates • 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

5. Consumer Information • www.cars.gov permits consumers to find EPA mpg data (link to www.fueleconomy.gov) 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

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

17. 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

18. 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

19. 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

20. 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 www.cars.gov