By on July 7, 2009

I remember when I was 16 years old, one of my friend’s dad had a near-new Toyota Celica All-Trac. It was gorgeous. The black paint was svelte and flawless. The leather pristine. It was a true work of art. Except it had one tiny little flaw on the vehicle. The VIN was not ‘authentic.’ It had been taken off another vehicle from ‘far far away.’ This was in the bad old days where odometer rollbacks (which still happen) and washed titles (ditto) were still common. Today? Well, I’ll put it to you this way, even a finance company with as many computers as NASA was screwed seven ways from Sunday by a bunch of Nigerians using an old lady’s information. The clunker auditors are going to have to keep their eyes REAL open in this ‘information age’ to catch these snakes . . . and it won’t be easy. Here’s just a small slither of stealth that can happen just on the trade-in side of the equation.

What can happen once a vehicle is traded in? An awful lot. For starters it can be sent abroad. Really. Really. Cheap. It got so bad that the Mexican government (one of many destinations) decided to allow only ten-year-old cars to be registered that came from Yankeeland. It didn’t matter in the end though what the government’s ‘official’ position was. The business of bribery continues to this day on both sides of the fence, and cars found their way into the system regardless of what the laws were. By the way, Mexico is just one place where a ‘clunker’ won’t be missed.

What does this mean for cash for clunkers? It means there isn’t much stopping a recycling center from stripping off the VIN’s. Giving the requisite pictures and evidence to whoever needs it, and making private arrangements to send the vehicle outside the US. The percentage profit would be somewhere between a title pawn and meth distribution, and the governments ability to track it down through paperwork alone would be zero. So long as the VINs match, the people are genuine buyers, and the people involved keep their yaps shut, it will just be a nice four figured profit per vehicle. No questions asked. But this is just really a very small slice of ‘trade-in’ paradise. A far bigger one?

Open up your local newspaper and look under the ‘auction’ or ‘impound’ section. You’ll see hundreds of vehicles with their VIN numbers displayed in all their glory. Most of these cars come from folks who don’t want or need their clunker anymore. They may be as poor as dirt, taking drugs, out of work, or in jail, but they still technically own it. The price to buy one of their clunkers at a public auction? If it’s fit for the crusher, the cost today is about $100 due to cheap commodity prices. The prior owner has to be notified before the sale and this information is often in turn given to the new owner of the vehicle.

Many of these vehicles are never put into a new name. If it’s got even a breath of light, it can be ‘flipped’ and sold with the paperwork intact. No questions asked and no profits traced. There is absolutely no auditing for the transfer of ownership in most states. Just the proceeds from the sale. With a very small level of computer knowledge (or bribery) you can also find out practically everything about the person.

Since ‘Cash for Clunkers’ doesn’t require that the person have insurance for the vehicle before trade-in, there’s no stoppage that can occur there. Big mistake. A lot of folks who get their vehicles sent to the impound/tow lots usually move, involuntarily, without a forwarding address. In turn a lot of apartment complexes will request the towing of a vehicle from their property if the vehicle has anything from an expired tag to an eviction.

You can get these car for almost nothing if you’re a professional, develop a Fake ID with a little help and monetary dispensation, buy the car using their identity, and simply have the government paperwork forwarded to a PO Box which can then secure the taxpayer largesse. It’s easy. Unless those who audit this operation can track the VIN’s status online, which is hard since a lot of the local papers aren’t given an online edition, everything will seem picture perfect to an auditor.

But there are ways to find this information out. One would be to target the audits based on income. If a person is only earning $15,000 a year and they’re buying a car for the same price, that would be a red flag. So would contacting the county government and finding out whether the vehicle was impounded at a certain point. Court orders and impounds require paper trails and most of them can be found in a minute’s time. There is also one very strong impediment to sending these cars out of the US. That would be to have the clunker sent ‘on-site’ to a salvage auction where it could be crushed in exchange for receiving the rebate.

If the auditors are positioned there and literally see the crushing of the car, it eliminates the possibility of the car being recycled somewhere else. The system would hardly be a fail-safe at this point. But it would be a start. In the next installment I’ll focus on the dealer.

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29 Comments on “Hammer Time: How to Cheat on the Cash-for Clunkers Program, Part One...”


  • avatar
    cfisch

    As it now stands a customer tradinf a vehicle has to prove that the vehicle has been insureed and registered to the same individual for at minimum one year

  • avatar
    gslippy

    This may sound naive, but since CFC is only expected to cover about 250k vehicles, I’m guessing that there are enough legitimate clunkers out there that most people won’t need to beat the system.

    Dealing with fake IDs, bribes, and transport to Mexico all sounds pretty elaborate and risky to my *law-abiding* mind.

  • avatar
    sitting@home

    You only have to look at the number of scumbags who tried to milk money from the 9/11 funds to know that they’re going to be swarming around this cash-for-clunkers like flies around fresh doggy doo.

  • avatar
    johnthacker

    Transport to Mexico sounds rather easy. There certainly is skepticism from German environmental groups about many of the Abwrackprämie clunkers being shipped in Eastern Europe.

    I guess we’ll end up seeing how close this program can come to meeting the theoretical projections, and how far away reality will be from the ideal.

  • avatar
    twotone

    I read that the clunker had to be registered and insured in the seller’s name for one year prior to trade-in.

    Yes, no?

    Twotone

  • avatar
    rdodger

    Twotone,

    The vehicle has to be insured and registered to the same owner for a full year prior to trade in.
    This info comes straight from the CFC website.

  • avatar
    50merc

    Twotone, I saw the other day that the gummint decided not to require proof of insurance coverage for a year because some states don’t require insurance. (Idiots! Those states, I mean. OK, the feds as well.) At the time I, like Lang, thought this is a mistake. The insurance papers provided another third-party documentation source, a backstop to the registration requirement, and insurance coverage helps attest the clunker was drivable, not an old junkyard hulk.

    Once the regulations are issued, we’ll know for sure how the insurance requirement will be applied.

  • avatar

    Johnthacker: There sure had been massive fraud cases at the beginning of the German Abwrackprämien program. The report linked to in your comment refers to those early cases. You could get the money with minimum documentation, a copy of your title sufficed. Unusual for a country like Germany that demands everything in triplicate. When this came up, the program was tightened up. The invalidated title has to be filed with the paperwork in original. (Which may not matter if the “crushed” car ends up in a country that doesn’t insist on a German title.) There probably are other measures. Ever since, there were no new reports about fraud. Now, people complain that the Abwrackprämie has ruined the lucrative used car trade with Eastern Europe and Africa,

  • avatar
    threeer

    The vehicles do still have to show registration, so simply going to Craigslist and buying up clunkers makes no sense. Beyond that, say I do manage to buy a $250 clunker and somehow make it to the trade-in…I still have to be able to make the payments (or come up with the purchase price differential). People are acting like folks will buy clunkers for peanuts and get a new car for free. And I don’t see a huge black market developing for beat up wrecks (that’s what Craigslist is for to begin with). Cars going to Mexico?? Again, given that the cars are supposed to be scrapped here to begin with, who cares? And if the car is “recycled” here in the States for the C4C…same issue…ultimate buyer still has to pay the difference for the new car.

  • avatar
    Lumbergh21

    I believe the potential for fraud exists at the “recycler’s” end of the deal. They don’t remove the engine, as required, and sell the remaining parts or crush the whole car for scrap, but rather send the whole car to Mexico where they get say $1,200 for a car for which they paid $200. Unless there is a G-man stationed at the auto yard, there is no actual proof that the car was disposed of as stated by the recycler. The recycler just fills out the paperwork stating that the car was destroyed. Without the Mexican government’s help (ha ha) this shouldn’t be all that difficult.

  • avatar
    Lumbergh21

    Looks like you are using the photo from a truck whose advertisement would include the immortal words used for all classic junkers “it ran when I parked it (IRWIPI).”

  • avatar
    mtr2car1

    I get that like most programs, there’s going to be someone trying to cheet or something, but the thing about this program is that you have to SPEND money on a new car to sham the system.

    So a dude buys a $250 clunker to get $4500 from the government because the rules were loose, oh well, shame on us for voting those dopes into office – at least it’s one less car sitting in someone’s front yard on blocks.

    The back end trouble I see is if it doesn’t get crushed. That thing could get “recycled” several times btw 3 businesses working together.

  • avatar
    gslippy

    @threeer: I agree. Even if your clunker came at no cost to you, you’re still talking about taking on $10-40k in new car purchase, even after the rebate.

    Skirting the law just to save a fraction of the purchase price doesn’t seem worth it.

  • avatar
    mpresley

    My first car was a ’62 Chevy wagon (the model below the Impala–not sure what it was called back then). I “bought” it from a fellow enlisted soldier who only “used it on weekends for fishing.” I paid $100.00 in 1973 money–or about $500.00 in ’08 pre-Obama bills. I never received the title (the owner never got around to getting it to me before I was transferred to Germany–maybe he never had it, either).

    When I moved to Europe I left the wagon with another GI. Once back stateside, a couple of years later, my buddy told me he’d “sold” it to another GI for 50. Thinking back, I wonder how many “clunkers” are like the one I “owned.” No insurance, no title, no nothing except cheap run it until it dies or you move out transportation. And I wonder how many people with true “clunkers” are even motivated or able to trade up to a new car. Probably not many, I’d guess.

  • avatar
    Steven Lang

    The greatest opportunity for fraud won’t come via the retail customer. It will be from those who already have the relationships in the industry.

    Keep in mind that the government is now going to deploy spot checkers. It’s better than no regulation at all. But the fact is most of these ‘clunkers’ won’t be audited as it stands at the moment.

    My position is that if the goal is to remove these vehicles from the road, that should be the end goal. You can take specific measures that would virtually ensure the vehicles would end up scrapped versus resold and recycled.

  • avatar
    seeseebutler

    I see at least one way the system can be “gamed” by unscrupulous retail customers: Lets say someone owns a 1999 Chevy Suburban C2500 LT in excellent condition that is worth $10,000 retail. (This is consistent with NADA values.) This person could buy a barely-running piece-of-crap for five hundred dollars that is the same make, model, year, color, etc of the Suburban they already own. The crook could then switch the VIN numbers and license plates and take the clunker to a dealer and, viola, he gets a 4500-dollar trade-in credit under the Cash for Clunkers program. He will effectively “net” $4000 dollars from the scheme. He will still have the 10,000-dollar suburban but with a different VIN number. Hopefully someone form the National Highway Traffic Safety Administration (which is responsible for monitoring the program for fraud) will be on the lookout for this.

    The greater scandal is why this bonehead program ever became law in the first place. Other then possible charlatans, see above, the other beneficiaries of this law will be a narrow group of people who, 1) have older serviceable SUVS/trucks that are worth less then $4500 and thus worth trading in under the program, and 2) can afford to buy a new car. Most people who drive crappy old gas guzzling SUVs do so because they cannot afford new cars. The potential honest participants will therefore be people who tend to have money but nonetheless hold on to their vehicles for a long time, often as a backup or work/hobby vehicle. Be on the lookout for wealthy farmers to turn in their old pick-ups. But hey, they already get enormous subsidies so what is a few billion more?

    Finally, crushing serviceable vehicles and giving people money to buy new cars is by no means a “green” policy. It takes a large amount of energy to manufacture any vehicle – even a small car. When we hear about carbon footprints this is rarely discussed. Cash for Clunkers is not about energy conservation, it is all about Congress and Obama feeding the pigs in Detroit.

  • avatar
    bludragon

    I assume the most obvious fraud is for someone to immediatly sell the new car having saved $4500 on it’s purchase cost. I guess the other one would be for a dealer to start claiming against new cars sold to customers without an applicable trade in.

  • avatar
    coolhandluke2

    I was just at the dealership and they actually told me to check online for info because they were not in the loop yet. Are you kidding me? I found this guys site www. slickbudget .com who has all the information about how much you get, the cars you can get, and how to make it work legally.

  • avatar
    RogerB34

    Nice trim, needs a little paint, 4 new tires and good to go.

  • avatar
    Andy D

    #$%@ cash for clunkers. Where can I buy the 50ish Jimmy PU?

  • avatar
    ohsnapback

    This article is so full of misinformation and inaccuracies, I don’t even know where to begin.

    Given that, I’ll start with the biggest impediment the author glosses over – anyone who is trading in a ‘qualifying vehicle’ must have been the owner, continually, for one year, with the vehicle being registered in their name for that period of uninterrupted time.

    That portion of the legislation is probably the clearest, in what is a poorly written bill.

    What are you going to do to bypass this?…Steal someone’s ID based upon the VIN tricks spoken of, and go to the dealer and try and buy a new car in that person’s name?

    Good luck with the registration and insurance process on that new car purchase.

    Good luck with all of that.

    By the way, the purchaser of a new car under this legislation can’t sell it or transfer the title for 6 months after purchase.

    Also, if you do transfer the title to the new car after 6 months, sales tax will be due by the 2nd ‘purchaser’ on that transaction.

  • avatar
    Steven Lang

    I don’t see individuals doing this. As I’ve already stated, it’s the dealer side that is far more able to capitalize on what you just mentioned.

    Vehicles for this program can already be bought dirt cheap at the impound sales along with the in-op auctions. In fact, the certified letters that are sent for these vehicles get returned if the individual no longer resides at the address and does not provide forwarding information.

    The dealer can arrange for the sale of the vehicle and conveniently get it back 6 to 7 months later as a trade-in. It can then be sold as a low mileage CPO car.

    This really isn’t hard to pull off. A driver’s license number can be simply filled out by a clerk at the DMV office with the dealer simply saying, “We forgot.” That actually happens quite a bit in the paperwork side. Other than that, I don’t see any possibility of a red flag. Unless…

    The auditor hunts down the person on the paperwork.

    That can be done. But the question is WILL it be done.

  • avatar
    ohsnapback

    Steven, I understand in theory how it’s possible for dealers to capitalize in the way you mention, but a lot of stars and moons have to align for it to happen. How will a dealer find and arrange for a fake buyer? Will dealers really risk the legalities of all of this? And someone still has to arrange for a purchase of a new car for any benefit to be realized, with severe restrictions on the transfer of that new car after the fact.

    As far as the junk or salvage business, they won’t be able to realize any benefit unless the dealerships do, as that’s where the clunkers will come from.

    I think the fact that many dealers aren’t even aware of how this legislation works yet, days before it goes into effect, speaks volumes about what a clunker of a bill this legislation will be.

    Here’s a good layman’s explanation of the hoops and requirements under the CARS Legislation by U.S. News: http://www.usnews.com/articles/business/your-money/2009/07/02/making-sense-of-cash-for-clunkers.html

  • avatar
    Steven Lang

    “How will a dealer find and arrange for a fake buyer?”

    They can simply create one from information that is already available.

    “Will dealers really risk the legalities of all of this?”

    Many of them are already slated to shut their doors. It wouldn’t surprise me one bit if a few of them decided to pursue this path. When an ambitious person sees their way of living being eliminated by a government subsidized company, they can get rather nasty about it.

  • avatar
    Airhen

    So it looks like this program is going to cost the taxpayers A LOT more. FIGURES.

  • avatar
    Stingray

    Changing VIN numbers is not as easy… without leaving traces.

    Unless you gringos have much much better tech than us on that.

    This is in reference to the 10K$ Suburban. You must at least swap the chassis to change the VIN, and many many other places.

    Down here in Venezuela, you can’t import a used car unless you prove ownership for at least 1 year in the country of origin.

    250K cars means there’s a LOT of money in play. I’m sure scams will abound.

  • avatar
    commando1

    Everyone’s forgetting the number 1 rule: In EVERY govermint program, 10% is automatically added in for the fraud factor. Plus, Congress only calls in for a GAO audit if a lobby with a self serving interest prods them.

    So, relax. It’s covered. Move along folks. There’s nothing more to see…

  • avatar
    Tommy Jefferson

    The trick will be in verification of ownership for the required year. I bet it will be some paper form you send in with no backup checking.

    I intend to lie on the form saying I owned the car for a year. Odds are it won’t be checked.

    I’ll buy my Jetta Diesel new, then pocket the $4,500 and sell the car for near what I paid for it a few months later.

    This operation will not reimburse me for the decades of government ripping me off with the Social Security Ponzi scheme, but it’s a start.

  • avatar
    tomhipon

    Personally this is another government sham. Companies like http://sicashcars.com and http://cashforcarsnewyork.com have actually been buying more cars since commencement of this plan. Theres still a market for these older cars. People cant afford to buy new cars. Why not just sell your car instead of getting roped into a car you dont want and cant afford. By gettting cash for cars you have the ability to go and get another used vehicle you can afford.


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