I agree with James on the Dremel and X-Acto tip; that ball-shaped milling bit is the ticket for making convincing 'rust through' damage.
For surface and spotty rust on my Charger, I used a combination of chalk pastels, drybrushed paints(various rusty & grimy colors), and a product called 'Instant Rust' by Modern Options/Sophisticated Finishes:
I've also used it for the all-over surface rust look:
Michaels craft stores sells the two-part set, which consists of a base paint that contains fine metal filings, and the top coat that accelerates the rust.......it goes on like paint, but it is real rust. With a little practice, I've found a few new ways to apply the stuff as well.