Government Spending

Confessions of a Cash for Clunkers Scammer

One man's quest to get Obama to pay for his Nissan Versa

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We'll call him Mr. Sparkles. When we met to discuss his cash-for-clunkers scam, he wore a navy blazer and tie—perfect camo for a D.C.-based criminal. Over chicken makhani and naan at an Indian restaurant in Dupont Circle, Mr. Sparkles poured out his story: a sordid tale involving high-wire deception, threatened friendships, and a couple of Nissans.

Earlier this summer, when the Obama administration's plan to offer large subsidies to get old cars off the road and encourage people to buy efficient new ones became public, Mr. Sparkles arranged a deal with a friend. We'll call him Mr. Crayon. For $1,000 Mr. Sparkles would take possession of a spare clunker owned by Mr. Crayon. Not just any clunker, but a far clunkier clunker than Sparkles' own 1994 Accord station wagon: a 1994 Nissan Pathfinder. With a blazing combined mileage of 15-miles-per-gallon, the vintage Pathfinder would be eligible for trade-in when the so-called cash-for-clunkers program kicked in. And so the scam was set in motion.

Early summer 2009, Mr. Sparkles was tooling around in the Pathfinder, feeling good about his scheme. The two conspirators were on the verge of a title transfer when a complication developed. The details of the plan were released, and it became clear that only someone who had owned and insured the car for the previous year could take advantage of the $4,500 government subsidy for new car buyers.

The plot thickened. Mr. Crayon—who had no interest in acquiring a new car—would retain the title, while the understanding persisted between the two men that the ill-gotten government gains would fall to Mr. Sparkles. Mr. Sparkles shopped for the optimal cash-for-clunker car value, and they waited, eying each other nervously.

On Monday, July 27, the program went into effect, but suddenly—a twist! Clunkers were getting converted to cash at a furious rate, and Mr. Sparkles, previously elated with the incipient success of his plan, unexpectedly found himself facing a dark Thursday night of the soul. "Cash for Clunkers: Suspended!" screamed the headlines. The program ran out of money in less than a week. Mr. Sparkles calls the Thursday night "one of the low points of my life." Despondent, he could only reply "Saw it. Sucks" to an email with a story about the suspension of the program at 8:45 p.m. When Mr. Crayon confirmed that their worst fears had been realized after 11 p.m. that night, Mr. Sparkles replied tersely: "Yup. My life sucks." Would the whole scheme come toppling down, Mr. Sparkles stuck $1,000 in the hole with a clunkier clunker than before? Could the friendship between Mr. Sparkles and Mr. Crayon survive?

But at 10:21 am the following day an email went out to the conspirators containing an AP story about the revival of the Cash for Clunkers program with the subject line "Keep hope alive!" And a promise of $2 billion in (unspent) stimulus fund from Congress later, the plan was back on.

On Saturday, "Mr. Crayon" bought a new car.

Mr. Sparkles doesn't live extravagantly. He says his government-subsidized 2009 Nissan Versa sedan is the first new car he has purchased since 1987. Here's the final math: The car cost $11,998.50 at the till, including tax and fees. The Feds subtracted $4,500 from the bill. That's $7,498.50 plus the $1,000 that changed hands between friends.

A brand new sedan for less than $9,000 ain't bad. But the price could have been better, he says. His first stop for the trade-in was Passport Nissan in Alexandria, Virginia, because the dealership had a slightly cheaper "Internet price" available. But the Versa was popular with the newly-declunkered, and by the time he arrived the best price the dealer would offer was $1,000 higher. As with higher education and houses, when the government offers to cover a chunk of your costs, savvy sellers know to jack up the price.

But eventually a car was secured. Mr. Sparkles picked it up this morning, in fact. Technically, the car isn't his yet. Mr Sparkles will have to drag Mr. Crayon to the DMV in a week or two to have the title transferred. But Mr. Sparkles reports that "it's just like any other used car purchase at this point."

And so ends our tale of how a clever huckster outwitted the President of the United States.

The point isn't that cheating is rampant. It probably isn't. As Mr. Sparkles points out, the confluence of fitting clunker quality with a friendship strong enough to withstand a fairly pricey illegal transaction and a Saturday at a Nissan dealership must be fairly rare.

There has been more than enough discussion about how much good, if any, the program will do for the American economy or the American people in the long run. (Much of it here on this very site!)

But take Mr. Sparkles' tale as a cautionary one—a study in how to turn a good, smart, resourceful man to a life (OK, a summer) of white collar criminal scheming. All it took was a lump of seemingly free cash from Uncle Sam. By his estimation, Mr. Sparkles spent 40 hours planning and executing this scheme, with the time in the DMV still ahead of him. He calls the program "terrible, hideous." But once the prospect of getting Obama to buy him new car loomed large in his imagination, Mr. Sparkles' mind started churning on ways to scoop up some of the cash being scattered around.

Like the clunkers turned to scrap as part of the deal, Mr. Sparkles' time was a deadweight loss to the economy. That time and money could have gone to something else, with no destruction of working hours or '90s cars involved. Likewise with the car dealers, thousands of whom jumped through hoops to become cash-for-clunker eligible dealers. With the right friends, the right government program, and the right beater car, it could happen to any of us.

Katherine Mangu-Ward is a senior editor at Reason magazine.

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  1. Not much of a scam there… all it means is that the money is divided between two people. But I’d bet that there is much more serious corruption going on, with dealers failing to destroy cars* and actual document falsification to “prove” ownership for >1 year.

    *Failing to destroy cars makes this program less damaging, so maybe this is the good kind of corruption.

  2. I also can’t see the dealers destroying all these perfectly good cars. Shit, they’re getting them for free. If they can circumvent the destruction process, they can then sell the cars for 100% profit (minus fixing them up). I guarantee the dealers will find a way to keep the trade-ins that are in the best condition from getting destroyed.

  3. Epi,

    They might get destroyed, but not before every spare part with any resale value is removed. Im understanding that many are getting stripped before they get to the dealer.

  4. Perhaps I’m being slow today, but… what, if anything, is technically illegal about the transaction described in the article? As near as I can tell, the deal is legit: Crayon trades in his clunker exactly in the manner prescribed by law, and then he sells his new car to Sparkles a week or two later.

  5. “But at 10:21 am the following day an email went out to the conspirators”

    Exactly who sent that email Ms. Ward? hmmm

  6. great article – but now I can’t shake that feeling that my having read it at work has increased the deadweight loss resulting from C-for-C.

  7. Bernie Madoff got 150 years for a $17billion scam. How much time should Obama get?

    By my rough estimates, less than half of Americans can benefit from this program, yet we all pay for it.

  8. I’d bet that there is much more serious corruption going on, with dealers failing to destroy cars* and actual document falsification to “prove” ownership for >1 year.

    Say a partnership between a junkyard dealer, a car dealer that’s got both new and used lots, and an illegal chop shop. Everyone gets a cut.

    Also, I’d bet there’s a lot of cases of someone turning in a beater, selling the new car right back to the dealer, and the pair subsequently splitting the $4500 rebate.

  9. Forgive me for being thick, but… where’s the ‘scam’? I’m looking for the fraud part (I mean, beyond the fraud that is the CFC program) on the part of Mr. Sparkles. Did I not read the article closely enough? I don’t recall any forged documents or direct misrepresentation of identity.

  10. not sure this article hit the nail on the head, but the cash for clunkers is the most wasteful thing imaginable. it’s a gimmick in so many ways. if i were a car-dealer, i’d be sure to find a way to export the old cars to places like russia, mexico, china. Russians already buy most of japan’s old cars.

    and to the stupid fucks who think this is saving the environment or something: it was calculated that the oil savings from this program amount to about an hours’ worth of oil that the USA consumes on average. saving the environment, huh?

  11. I would bet that Mr. Sparkles and Mr. Crayon are crafty, clever Indians, and I don’t see anything illegal about their transaction at all, just enterprising. Good for them!

  12. sounds liekt eh least wasteful stimulus I’ve heard of yet. Some middle class guy with a job is getting money from the trough instad of Goldman Sachs or some lazy fat state worker who thinks it is his brithright to make children pay for his big pension the rest of his life.

  13. The guy is obviously a Federal employee. What other fully employed group has the time to work a ridiculously low payout plan like that. There will always be people looking for the shortcut, that end up expending more effort on beating the system than they would have by working hard for it.

  14. I thought the same thing (that others pointed out above) that what they did is not actually illegal. In fact it still got an old car off the road & a new one purchased, so from the standpoint of the purported goals of the gov’mt, why should they care?

    To ‘destroy’ the cars they have to disable the engine. My thought is, to see if vehicles are really ending up off the roads, check the orders for ‘service replacement’ engines among the car makers and junkyards. I bet they are going up at an astounding rate. After all if you get the car for free, spend $2000 to throw a new engine in it, you could still sell it for a couple grand more than that and make some money (knowing it has a brand new engine will certainly raise the car’s value vs. a similar age car with the original powerplant).

  15. Since this has been posted. I’ve heard the State AG’s have been cracking down on cash for clunkers scammers in the aftermath of the program.

  16. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books.

  17. My opinion of this is that if it saved the dealers and gave middle class americans a break. It was a good thing.

  18. I realize that this article is a bit outdated, but I was curious if anyone had any follow-up opinions on the Cash for Clunkers program (and the overall used car climate) and how it is affecting the current market in June 2011. As a car dealer in Kansas City, we have firsthand experience with the current market being incredibly high and how a lot of dealers are having a hard time keeping their lots full. I’d like to hear some of your thoughts on this!

  19. After all if you get the car for free, spend $2000 to throw a new engine in it, you could still sell it for a couple grand more than that and make some money (knowing it has a brand new engine will certainly raise the car’s value vs. a similar age car with the original powerplant).

    Okmulgee Attorney

  20. I bookmarked it right away handsome, but it would be a big advance to put through bookmarks, Thanks.

    Okmulgee Attorney

  21. I Enjoy the thrills and chills in one man’s quest to scam the cash-for-clunkers program into buying him a shiny new Nissan Versa?using someone else’s clunker. Senior Editor Katherine Mangu-Ward gets all the dirty details from the scammer himself.

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