The reports I heard said that most “clunkers” were replaced with vehicles which got identical mileage and I don’t know what impact the program had on jobs, but it seems like it must have been a just a blip. What is the Straight Dope?
Thanks,
Rob
Where did you hear that the replacement vehicles got identical mileage? The requirement was that the traded-in vehicle had to get combined mileage of no more than 18 mpg and the purchased replacements had to get combined mileage of at least 22 mpg. See Wikipedia for details.
Read this. The associated podcast is pretty good too. I think there’s no doubt that the program jacked up car sales for a period. The question is really how many of those buyers would’ve bought anyway? The program simply accelerated their buying decision a bit. Anyway, read the articles.
Perhaps I am confusing identical mileage with identical make, which while not necessarily the typical case, did happen. Also, it seems like the typical vehicle sold was some type of SUV. I will check out the links later.
Thanks,
Rob
Don’t recall where I read this (possibly a nutball website) but I seem to recall seeing that some large majority (over 75%?) of the cars traded in were American made and they were nearly all replaced with imported models – and that it cost the government $24,500 to administrate each $4,500 rebate.
Well, I got rid of my 2001 Isuzu Rodeo and picked up a 2009 Nissan Versa. I would have purchased a new car within a year or two anyway, as the SUV was starting to be unreliable, but I would never have gotten $4500 for the trade-in at any other time.
Regarding the “would they have bought a new car anyways?” question, I suspect a lot of people who would otherwise have bought a newer used car instead opted for a brand-new car. One of the persistent problems with selling economy cars is that the sorts of cheap bastards who want economy cars are usually smart enough to realize that a brand-new car is not a good deal compared to a late-model used car. I would not be surprised if C4C helped get more new econoboxes and hybrids into circulation.
Plus I always did think the whole environmental justification for the program was a little wishy-washy, but if you’re the government and you’re trying to dump money into the economy, it’s not a bad way to do it. Between the dealer and distributor infrastructure and the various component manufacturers (who are still to a large degree US-based), it gets a lot of money into the sectors and income brackets they wanted it to. Whether it actually did that or not, who knows?
Here is a chart of 2009 car sales by month from the Wall Street Journal. You can clearly see the two month spike from C4C, then a slight decline the next month - though nothing like the increase. After that car sales grow at a rate that would be reasonable to expect without the program. I know that some people predicted that C4C would trash car sales the rest of the year, but that clearly did not happen. It certainly helped the car companies by clearing out their inventory.
Several sites I browsed through said that the cost per car was $2,000 (after rebate, I assume.) Ford’s market share went up slightly, and GM and Chrysler’s went down, but that is probably more a factor of their product mix than anything else. Remember that lots of “foreign” cars are made in the US.
I did some good for some people. For instance, here is a (very, surely not comprehensive) short list of some high/higher-end cars destroyed in the program.
A couple that stand out to me are the 1997 Aston Martin DB7 Volante, which went for nearly $150,000 new and still gets around $40-50,000 in resale, and the 1993 Mazda RX-7, which is a highly desirable car within the import tuner crowd and could have generated some good money for the owner above and beyond the program value.
I do find myself questioning what these people were thinking. But hey, if they want to light their cars on fire it’s their business. I’d have taken that Aston, though. And the Beemers. Hell, I would have taken one of the least desirable Vettes they destroyed. Those that have those cars are surely thrilled, though, because the continuing reduction of availability of those cars by any means only increases the value of their asset.
Dangit, I had some time ago and absolutely fantastic cite for what happened, with graphs and raw daya and analysis of everything in simple, concise statements. I am no sure if I can find it again.
The short version, however is that it was an utter disaster. The program was helaciously expensive per additional car bought because most people simply delayed their purchase (the aftershock was noticable but not as significant). Ultimately, the program was costly and ineffective.
You also have to account for the dip in sales before C4C, as there is no doubt that many people delayed purchases to take advantage of the program.
Here’s what Edmunds had to say. Edmunds sales forecasting is very good, and has been used by the industry for years.
Here’s their methodology:
So, it stimulated car sales, but only by about a quarter of what the government claimed, and the cost per car was outrageous.
Other problems with the program include the fact that dealer rebates declined during the C4C program, so the actual savings to the consumer wasn’t that great. In addition, compressing all the sales into that small time period caused shortages of some of the more in-demand high mileage vehicles, causing some buyers to settle for lower-mileage vehicles than they would otherwise have purchased.
The conclusion has to be that it was a wasteful program that did very little good but cost a lot of money.
Well, you’ve likely not seen pictures of the vehicles that were actually driven in. It could be that they were completely rusted out and barely running, or that they had significant frame or fire damage…I mean, someone who owned an Aston almost certainly knew what they had and how much one would be worth on the open market. Either that or they just wanted to watch someone completely destroy something so “wasteful” as such a vehicle. Who knows. Maybe it was someone who won the car in a divorce and wanted the spouse to have to suffer by watching it destroyed.
A bit off topic, but I submit to you this link: First-Ever 24 Hours Of LeMons Corvette Gets Zero BS Penalty Laps!
The 24 Hours of LeMons (not to be confused with that other race) is an endurance race for cars that cost less than $500. One team entered a Corvette they bought for $300. It didn’t do well, but obviously there are running Corvettes that are worth quite a lot less than the C4C allowance.
I see a small decline in light truck sales, but no decline in car sales. I understand the claim is that sales would have spiked without it, but that does not seem borne out by the sales figures after the program was over.
I remember you quoting them as saying that the bottom would fall out of the auto market after C4C. I’m sure their methodology was great. That was why I was very interested in seeing actual sales figures. Except for the expected decline the month after, it looks to me like car sales resumed their upward trend as if C4C had never happened. Sure Edmunds could claim that there would have been a bigger trend, but given the increasing unemployment and general gloom back then, I’m less than convinced.
At least now I understand where the $24,000 number comes from.
I don’t understand this objection. The optimal consumer rebate, for the industry, was just enough to get them to buy. Unless there is evidence that a bigger rebate would have caused a much larger sales increase (not clear) the improved profitability of the sales to the car makers is a good thing. Yes there were some shortages, but the average increase in mpg over the trade-ins was still higher than forecast. I’m having a hard time seeing that selling out of a product in the middle of a bad recession is a problem. The average mpg increase over the entire fleet was < 1 mpg, but it is very hard to move a number from such a massive number of cars very far.
The program also excluded people whose present cars didn’t qualify, like me.
I know the usual suspects will declare it a disaster, but I’m interested if anyone from a car manufacturer sees it as a problem. At the time we had statements from the car dealers about how great it was, but I won’t quote them because that was then. Do any of them say it hurt them in the long run? I haven’t seen any such quotes.
if you watch Antiques Roadshow, you’ll have seen ten thousand dollar paintings and jewelry sold at a yard sale for a couple of bucks - without government involvement.
You’d think the guy who was taking the car in for trade would have noticed. He could have bought the car for the rebate, given it to the owner, and profit!
In what condition?
You don’t know what sort of condition those cars were in. That does make a difference in their desirability.
As for the replacement of domestic vehicles with imported ones, there was no requirement that the purchased vehicles had to be manufactured in the US nor was there any requirement on the traded-in models. (If there were, then someone would have to decide what qualifies as a domestic vehicle.)
As for whether the program “did any good,” as the OP asked, one would have to decide what that means. The replacement vehicles have higher fuel economy, lower emissions and are generally safer than the ones traded in. By those measures, sure it did.
It is kind of funny that Edmunds based their analysis of Cash for Clunkers being a waste on the seasonally adjusted annual sales rate, go on for months about how it is just a big boondoggle…
… and then turn around and say that the metric is unreliable in a recession. Link.
From the link:
It also says that the biggest inaccuracy on record was last August during C4C, but you can hardly fault the metric being wrong in that situation.
You also have to factor in all the destruction of value done by Cash for Clunkers. Lots of old cars that worked fine were destroyed. You can argue that it’s a net benefit because we removed inefficient cars from the road, but the incentives were not set up to target the least-efficient vehicles, and simply subsidizing high-efficiency vehicles without destroying perfectly good cars would probably have done much better.