The Recession

In Hindsight, Maybe Cash For Clunkers Wasn't Great Idea

| by Public Citizen

Now that the National Highway Traffic Safety Administration has come up for air after a mad dash to reimburse dealers for cash for clunkers transactions completed in July and August, the agency has started to release (some) of the real data. And it looks like the glowing sound bytes of last month are giving way to some much less encouraging realities.

Let’s look at how the clunkers program shakes out now that the numbers are in.

Environment:

In August, shortly after Congress pushed through an additional $2 billion for the clunkers program in a frenzy before leaving town for summer recess, Christopher Knittel at the University of California-Davis estimated that the clunkers program was an expensive way to reduce greenhouse gas emissions. The best case estimate for the cost per ton of carbon dioxide saved through the program was $237.

Replacing guzzlers with fuel efficient new cars:

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As Public Citizen and other auto analysis suspected, the clunkers program was structured in such a way that would not necessarily encourage consumers to trade in a Ford Explorer for a Ford Focus. And while the initial lists of vehicle released by the Department of Transportation suggested that consumers were, in fact, make just these kinds of trades, the full list of vehicles, released on September 21, exposes the reality that the program sold a lot of light trucks, too. The revised top 30 purchased vehicles list includes the Chevy Silverado (number 8 ) and the Ford F-150 (number 10). Dropped from the top ten were the Toyota Prius (dropped to number 14) and the Honda Fit – practically the poster child for a high-selling fuel efficient car (dropped to number 17).

Enticing consumers to buy cars:

On September 18, Cars.com released the results of a survey of people who purchased a car in the past three months or plan to purchase a new car in the next six months, which sought to probe whether the clunkers program has encouraged new vehicle sales. The Cars.com survey estimates 30 percent of buyers who participated in the clunkers program weren’t planning to buy a car. We suspect that this is probably an overestimate. The stimulus value of the program rests on the ability to spur unintended sales. To date, NHTSA has not released any estimate of how many new sales the program generated, or if purchasers merely moved up an intended car purchase to capture the subsidy.