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Nelson Ireson
The Car Allowance Rebate System (CARS) was proposed as a necessary and cost-effective way of stimulating the economy and the car industry when it was being debated this summer. Once it went into action, it proved hugely popular, needing emergency funding expansion to meet the demand. But what was the ultimate cost?
Turns out it was about $24,000 per car sold, or per clunker turned in, depending on how you look at it. That's about $6,000 below the industry-wide average transaction price--meaning the CARS program was about 20% cheaper than buying the cars that wouldn't otherwise have sold outright.
Whether that's a good deal or not depends on your perspective. The CARS program did get nearly three quarters of a million heavily-polluting cars off the streets, and put about that many new cars--which despite not all being hyper fuel-efficient, are likely much better on emissions due to modern catalytic converter technology--in their place.
That helped boost the ailing car industry, including suppliers and dealer networks that employ hundreds of thousands of people in total in addition to the carmakers themselves.
But on the flip side, the analysis from Edmunds.com says that only about 125,000 of the vehicles sold through CARS were cars that wouldn't have sold anyway. And aggregating the $4,000 average trade-in rebate across that number of cars means that each one cost the government about $24,000.
The government, predictably, isn't fond of viewing the matter in that light, but it's a fair way of looking at the real cost of the program. In the end, the question of whether it was worth it may end up being answered in the less measurable terms of saved jobs, factories and dealerships that would otherwise have been pushed past the breaking point with another month or two of dismal sales.
What do you think? Let us know in the comments below, or weigh in with a full analysis by writing up an article for the High Gear Media network of sites, which you can learn about below.
--------------------------------
You can write for High Gear Media! Sign up and tell car enthusiasts and shoppers what you think about your vehicle, the industry or today's car news and get published to High Gear Media sites like AllSmallCars, LexusReports, FamilyCarGuide and more!
Rusty pickupEnlarge Photo The Car Allowance Rebate System (CARS) was proposed as a necessary and cost-effective way of stimulating the economy and the car industry when it was being debated this summer. Once it went into action, it proved hugely popular, needing emergency funding expansion to meet the demand. But what was the ultimate cost? Turns out it was about $24,000 per car sold, or per clunker turned in, depending on how you look at it. That's about $6,000 below the industry-wide average transaction price--meaning the CARS program was about 20% cheaper than buying the cars that wouldn't otherwise have sold outright. Whether that's a good deal or not depends on your perspective. The CARS program did get nearly three quarters of a million heavily-polluting cars off the streets, and put about that many new cars--which despite not all being hyper fuel-efficient, are likely much better on emissions due to modern catalytic converter technology--in their place. That helped boost the ailing car industry, including suppliers and dealer networks that employ hundreds of thousands of people in total in addition to the carmakers themselves. But on the flip side, the analysis from Edmunds.com says that only about 125,000 of the vehicles sold through CARS were cars that wouldn't have sold anyway. And aggregating the $4,000 average trade-in rebate across that number of cars means that each one cost the government about $24,000. The government, predictably, isn't fond of viewing the matter in that light, but it's a fair way of looking at the real cost of the program. In the end, the question of whether it was worth it may end up being answered in the less measurable terms of saved jobs, factories and dealerships that would otherwise have been pushed past the breaking point with another month or two of dismal sales. What do you think? Let us know in the comments below, or weigh in with a full analysis by writing up an article for the High Gear Media network of sites, which you can learn about below. [Edmunds.com] -------------------------------- You can write for High Gear Media! Sign up and tell car enthusiasts and shoppers what you think about your vehicle, the industry or today's car news and get published to High Gear Media sites like AllSmallCars, LexusReports, FamilyCarGuide and more!
Responses (9 total)
By goracle #1, Posted: 10/29/2009
Now I am really pissed my car did not qualify. Not only did I pay for this travesty but I was prevented from benefiting!
By salguod #2, Posted: 10/29/2009
I'm not sure you understand right, or I don't or I don't understand you.
Edmunds is saying that they figure that only 124,000 new cars got sold that wouldn't have otherwise, meaning the $3 billion spend equates to about $24,000 per add on sale.
They also say that the average transaction price at that time was $25,248 ($26,915 sale - $1,667 average rebate). So, ironically, the cost to the taxpayer per additional sale is almost equal to the cost of the vehicle itself.
So, it's not equal to buying 690,000 new cars outright, it's almost equal to buying the 124,000 additional vehicles sold outright.
So it was very expensive and did not do as much as they thought, but the politicians get to pat themselves on the back. Sounds like a successful government program to me.
By greedo #3, Posted: 10/29/2009
At $24,000 per car, they could have just paid all the people that would have been put out of work six months salary! This is the kind of math only a government could love.
By Limousine Liberal #4, Posted: 10/29/2009
While I assume most Limousine Liberals would see a greater good with the CARS program, all any objective observer (without some blind love of government) can say is: "Come on people". What a joke. These numbers underscore the danger of fantastic intentions and unfettered access to a taxpayer funded check book. All government programs / ideas are NOT bad. That kind of talk isn't fair/accurate. However, this kind of program - a giveaway to an industry , it's unions , etc - is the height of irresponsibility. Simply because a program is popular means nothing. Of course it's popular - it's a giveaway. Time to grow up.
By Fizz #5, Posted: 10/29/2009
Car sales went up....and then right back down. Economic forces are much to powerful to be manipulated but that won't stop people from trying. What's up next-oh yes, healthcare. H-m-m-m.
By Mrs. Satchels #6, Posted: 10/29/2009
This program was a camel, which is the definition of a horse designed by committee. It had two contradictory purposes: Improve sales of more fuel efficient cars, and boost auto sales, especially domestic ones.
So it's hardly surprising that it wasn't very good at doing either. To me, the much bigger question is: Did the extra sales of 124,000 new vehicles avert a collapse of the domestic industry?
But that's a much harder question to answer than the one Edmunds set up for themselves and then publicized.
By Erik #7, Posted: 10/29/2009
No, of course they didn't avert any collapse. Wasn't Ford the only U.S. automaker that did pretty well from it? Kudos to Edmunds for getting this out. This program made no sense at all. Just like the housing credit it's going to cause a massive downward market ripcurrent that only time will stabilize.
By ejhickey #8, Posted: 10/30/2009
Why does critical analysis generate such hostility from the WH?
By john #9, Posted: 10/30/2009
If "cash for clunkers" is any indication of how the govt runs things, then just wait for govt managed health care.
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