$24,000 Cash Per Clunker? So Says The Analysis

October 29, 2009
Rusty pickup

Rusty pickup

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.



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