Clunker Law Suit Filed: Consumer Wants Excess Salvage Value of Trade-In

Clunker Law Suit Filed

A lawsuit has been filed in federal court in New York alleging that dealers illegally kept the salvage value of trade-in clunker vehicles in excess of the $50 fee they were specifically authorized to charge customers for handling the transaction.

Under the federal Cash-for-Clunkers program last summer, the rules provided that the dealer could keep $50 for administrative fees for handling the clunker being traded in for disabling, but were silent as to the application of any additional salvage value. NHTSA regulators consistently took the position that this was an element of the negotiations between dealers and customers and it was reasonably concluded by dealers that they could keep any additional salvage value unless it was reserved for the customer in the deal.

Now comes a car buyer in upstate New York who has filed suit against a large multi-franchised dealer organization, who is seeking class action certification, alleging that dealerships there and across the country wrongfully retained additional salvage value contrary to the legal intent of the Cash-for-Clunkers program.

In view of the regulators position on salvage value, which was well vetted by dealers and their representatives at the outset of the Clunkers program, along with the fact that consumers trading vehicles for Clunker discounts had no contractual basis to expect additional trade-in compensation, this lawsuit should be a long shot for the plaintiffs. Hopefully, this proves to be the case.