Cash For Clunkers: The Data On Why It's Working

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2009 Ford Focus S

2009 Ford Focus S

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Who knew? Turns out Americans just needed a little nudge to visit their car dealers, but the promise of an extra $3,500 or more in incentives was enough to push car buyers over the hump and get them to trade in their clunkers.

And how. As we reported Friday on our sister site, the Car Allowance Rebate Systems (CARS) program, usually called "Cash for Clunkers," has been so successful that it may have run through its allocated $1 billion in funds in just one week.

That led the US House of Representatives to vote to transfer $2 billion to the CARS program from an energy-loan guarantee fund. Yesterday, Republican Senators announced that they would oppose any extension of the program.

Nonetheless, Senators Dianne Feinstein (D-CA) and Susan Collins (R-ME) said they expect the Senate will ultimately vote to allocate the money. They had opposed an extension because they felt the current program did not require high enough mileage increases.

A Senate vote could occur tomorrow or Thursday.

But is it working?

Yet in some respects, partisan posturing seems to have overshadowed basic data analysis. Now the early reports are in from last week's sales. So let's consider the basic question: Is the program doing what it was supposed to do?

As enacted, the Clunkers program was something akin to the definition of a camel: a horse designed by committee. It had two goals that weren't always aligned: It had to increase the average gas mileage of cars on the road, but also encourage new car sales, period.

First, do the vehicles that have been sold get better mileage than the ones traded in? Yes, they do. But they were always going to raise average mileage; the interesting data comes in how much better the fuel economy actually is.

The National Highway Traffic Safety Administration said that as of yesterday at 4 pm, almost 134,000 vehicles had been traded in, earning rebates of $564 million.

That's an average rebate of more than $4,200--meaning that the mileage increases were far higher than the minimum necessary to earn the base rebate of $3,500.

1999 Ford Explorer Sport

1999 Ford Explorer Sport

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In fact, the US Transportation Department data showed a mileage gain of nearly 10 miles per gallon overall on the vehicles purchased as compared to the ones traded in, from 15.8 mpg for the trade-ins to 25.4 mpg for the new vehicles. That is far higher than the minimum requirement of a 4-mpg increase for cars and a mere 2 mpg for light trucks.

From trucks to cars

Moreover, the program is significantly shifting the new vehicle mix from light trucks to cars. While 83 percent of the vehicles traded in were sport-utility vehicles and pickup trucks, six out of 10 of the new vehicles purchased were cars.

UPDATE, Aug 5: Revised data from the Department of Transportation indicates that the five most traded-in models under the clunker program are: Ford Explorer (4WD), Ford F-150 (2WD), Jeep Grand Cherokee (4WD), Jeep Cherokee (4WD), and Dodge Caravan/Grand Caravan (2WD).

Following the top-five list are:  Chevrolet Blazer (4WD), Ford Explorer (2WD), Ford F-150 (4WD), Chevrolet C-1500 (2WD), and finally Ford Windstar (4WD) bringing up the rear. Of these 10, five are sport utilities, three are pickup trucks, and two are minivans.

In fact, the Ford Explorer--that quintessential sport-utility of the 1990s--occupied no fewer than six of the top 10 trade-in slots. Explorers from model years 1994, 1995, 1996, 1997, 1998, and 1999 were in the top 10, with EPA mileage ratings of 14 to 18 miles per gallon depending on drivetrain.

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Comments (23)
  1. I just posted that Cash for Clunkers was working as well. And I also commented on the fact that some in the media are using this to attack government healthcare. *scratches head*

  2. Wow you almost made it the whole article without sounding like a douche. Too bad you included the next-to-last paragraph. I'm just sayin'...

  3. Why Dave, because making a logical point is douchebaggery?

  4. I am a little confused by the numbers listed. As I am understanding this sofar 134.000 cars were bought under this program. This amounts to $564.000.000 and the total amount for this incentive was $1 billion. There should still be $436.000.000 available for approximately another 103.612 vehicles. So they want to put another 2 billion into this program? Shouldn't they run out of money first? It looks to me like only 56% of the first billion has been used?
    Am I missing something here?

  5. There is nothing green about crushing a vehicle and replacing it with any new vehicle. The energy required to build the new vehicle far exceeds the "savings" in fuel consumption. These vehicles are not being recycled in any sort of efficient manner, they are to be crushed or shredded. Watch this video of a car being destroyed and think of the stupid stupid waste. Maybe we can burn down some houses in the name of stimulus next.

  6. The biggest problem with this program is all the business used car dealers will lose since all the trade-ins for CARS have to be crushed. Also all the other businesses that the used car dealers send there cars to for any work that needs to be done to them.

  7. @RationalThinker: Researchers at Duke University actually studied this issue in some depth.
    Their conclusion: After the first 70,000 miles (far lower than the lifetime mileage of an average vehicle), the new car saves energy even accounting for its manufacturing (and, I suspect, the small amount of energy used to dismantle or crush it).

  8. @Joe: The trade-ins don't have to be crushed; they can be dismantled. Only the engines have to be disabled. See here:

  9. I suppose this is a good idea for people who have disposable incomes during this recession. For those of us who don't, it's better to stick with a car that is already payed off. Not to mention the new full coverage insurance policy required on a new car.

  10. Despite the compelling title to your post, you don't actually say WHY the program is working. I'm still not clear how a small incentive relative to the price of a new car is motivating people in such volume.

  11. @Brian: Fair point, actually. I didn't delve that much into the psychology, but there appears to be a lot of pent-up demand. Analysts surmise that the key may have been giving buyers an excuse to get to the dealerships in the first place. Roughly half the buyers, we hear, brought trade-ins that didn't qualify as clunkers--but they bought new or used cars anyhow.

  12. If you bought your brand new car with cash, good job. If you bought it with credit (I'm guessing what, 90% of people did that?) boo. Our economy is in the crapper because of too much borrowing already, and this is the solution? Stupid.

  13. This program should be for American made autos only. Why is taxpayers money going to the importers.

  14. @Mike: As the article says, several of the most popular vehicles from "import" brands are actually built in North America. Those include: Toyota Corolla, Honda Civic, and Toyota Camry.
    And the reason this is not restricted to US-built cars, as I understand it, is because that would violate pretty much every trade agreement the US has ever signed.

  15. It's a failure because the $436M Annie refers to isn't available - it's the typical overhead of a government program. About half the money disappears into the abyss. Green cars will eventually make it, but because some entrepreneur or smart business will find a way to make ones that 1) work and 2) people want. Government will never solve our energy problems.

  16. A relative handful of people grabbing money from the Feds in a tightly-constrained program is "significantly shifting the new vehicle mix from light trucks to cars"? How long d'you think this will continue? Will the next $2B (which should've been stimulus funds) even be used?
    The thought that there's anything remotely "green" about a program specifically intended to stimulate consumption makes me LOL. Wanna be green? Ride a bike. I'm just sayin'...

  17. If the federal government really wanted to get clunkers off the road and help the environment, it would have also looked at emissions, not just MPG to determine what makes and models of vehicles qualify for the Cash for Clunkers Program. And why
    disqualify vehicles over 25 years old? Aren't older vehicles, in general, less fuel efficient than newer ones?

  18. Trucks and Hummers, are SO far flipped in their "equity" position vehicles it won't help. This program simply takes cars off the road that are PAID FOR, and don't cost people anything to drive, just gas, and these morons are replacing their "debt free" lifestyles with payments and interest again. Why eat 1/2 of a $37.00 entre, only to throw out the rest when you're full? Vanity, and BS advertising is why.

  19. @Chris: Not sure why the 1984-and-after restriction, though perhaps there are so few cars remaining on the roads before that date in regular use that it wouldn't have made much statistical difference? Or perhaps the EPA mileage data pre-1984 wasn't comparable? Good question ....

  20. @Cameron: You are assuming (incorrectly) that all the new vehicles are financed! Anecdotal reports from at least a couple of dealers say that roughly HALF the people who take advantage of the vouchers are paying cash, though I don't believe statistics are being gathered on this.

  21. More carbon
    Almost half the carbon from the use of an automobile is generated during construction. Older cars are used as second or third cars and get lesser miles per year. Many new cars are totalled early taking their carbon deficit with them. A 'whole life' analysis would almost certainly indicate that 'cash for clunkers' results in more carbon in the atmosphere not less.

  22. @Hugh: Sorry, but that's not accurate. The carbon load from manufacturing a car with a 150,000-mile life is only 10-12% of the total.
    Duke University studied when clunker tradeins become carbon-beneficial:
    Your point about clunkers being low-mileage because they're second or third cars, however, may be one to consider. I'm not aware of any data being collected on that.

  23. Thanks for great information it’s a wonderful. Your site is very useful for me .I bookmarked your site!

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