Cash for clunkers: Credit can now be applied to cars on order

After some complaints from dealers due to dwindling supply, the National Highway Traffic Safety Administration (NHTSA) has now agreed to apply cash for clunker rebates to factory orders—vehicles that have not yet arrived at dealership lots. As long as the dealer and consumer reach a purchase agreement on a vehicle already in production, then they can qualify for the program and file the necessary paperwork.

This should help those dealers who are struggling to keep up with the demand from the clunkers program and whose business has been limited by the tremendous sales surge. Many manufacturers are increasing their factory production, including Ford who announced they are building additional Escapes and Focus', two of the most popular vehicles under the CARS program. Others have already transitioned to the 2010 model year and are beginning to ship vehicles to dealers.

The ramping up of supply and additional government funds, will help consumers take advantage of this program, but they still need to be aware of other issues that could cause confusion during the process. For instance, buyers are not required to sign contingency agreements to pay back the dealer if the rebate application is rejected. In addition, the dealer must allow you to take possession of the new car before their reimbursement paperwork is submitted. If a dealer is forcing you to keep your clunker until the deal is approved, report the dealer by calling the CARS hotline at (866) CAR-7891.

If you know all the facts of the program and are wary of potential advertising fraud and scams, then you should be able to take advantage of the federal rebate and enjoy a new, more fuel-efficient car.

If you recently purchased a new car under the cash for clunkers program, share your story in our forum or comments below. For further information, visit our cash for clunkers resource center, where you'll find FAQs, recommended cars lists, and the latest CARS news.

—Liza Barth