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Millions of dollars on car sales per month. The red line averages the sales for the month of the clunkers program and the month after.

Economic effects

The Economists' Voice reported in 2009 that for each vehicle trade, the program had a net cost of approximately $2,000, with total costs outweighing all benefits by $1.4 billion.[55][56] Edmunds reported that Cash for Clunkers cost US taxpayers $24,000 per vehicle sold, that nearly 690,000 vehicles were sold, and that only 125,000 of vehicle sales were incremental. Edmunds CEO concluded that without Cash for Clunkers, auto sales would have been even better.[57]

A 2012 study published in the Quarterly Journal of Economics found that the Cash for Clunkers program "induced the purchase of an additional 370,000 cars in July and August 2009" but also found "strong evidence of reversal" (counties with higher participation in the program had fewer car sales in the ten months following the end of the program, offsetting most of the initial gains).[58] The researchers found "no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program."[58]

Conversely, a separate 2012 study published in The Economists' Voice reported in 2009 that for each vehicle trade, the program had a net cost of approximately $2,000, with total costs outweighing all benefits by $1.4 billion.[55][56] Edmunds reported that Cash for Clunkers cost US taxpayers $24,000 per vehicle sold, that nearly 690,000 vehicles were sold, and that only 125,000 of vehicle sales were incremental. Edmunds CEO concluded that without Cash for Clunkers, auto sales would have been even better.[57]

A 2012 study published in the Quarterly Journal of Economics found that the Cash for Clunkers program "induced the purchase of an additional 370,000 cars in July and August 2009" but also found "strong evidence of reversal" (counties with higher participation in the program had fewer car sales in the ten months following the end of the program, offsetting most of the initial gains).[58] The researchers found "no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program."[58]

Conversely, a separate 2012 study published in Economics Bulletin had different findings. Using a reduced form demand model, the study authors concluding that the Cash for Clunkers program increased light vehicle sales in July and August 2009 by between 450,000 and 710,000 vehicles, and rejected "a 'Cash for Clunkers' associated decline in automobile sales in the months immediately following the termination of the program."[59]

A 2013 study in the Journal of Environmental Economics and Management concluded that of the 680,000 transactions that took place under Cash for Clunkers, the program increased new vehicle sales by about 370,000 in July and August 2008, "implying that approximately 45 percent of the spending went to consumers who would have purchased a new vehicle anyway," and that "Our results cannot reject the hypothesis that there is little or no gain in sales beyond 2009."[60] A 2020 study found that the program "caused roughly 500,000 purchases during the program period."[61]

A 2013 Brookings Institution study found that the Cash for Clunkers program resulted in a modest short-run stimulus effect (specifically, an increase in vehicle production, GDP, and job creation), but that "the implied cost per job created was much higher than alternative fiscal stimulus policies" and "these small stimulus effects do not account for the depletion of the capital stock that resulted from the destruction of used vehicles."[62] The study authors noted that "consumers who participated in the CARS program did not decrease other measures of consumption to do so."[62]

A 2017 study in the American Economic Journal found that the program, intended to increase consumer spending, reduced total new vehicle spending by $5 billion.[63]

Environmental effectsA 2012 study published in the Quarterly Journal of Economics found that the Cash for Clunkers program "induced the purchase of an additional 370,000 cars in July and August 2009" but also found "strong evidence of reversal" (counties with higher participation in the program had fewer car sales in the ten months following the end of the program, offsetting most of the initial gains).[58] The researchers found "no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program."[58]

Conversely, a separate 2012 study published in Economics Bulletin had different findings. Using a reduced form demand model, the study authors concluding that the Cash for Clunkers program increased light vehicle sales in July and August 2009 by between 450,000 and 710,000 vehicles, and rejected "a 'Cash for Clunkers' associated decline in automobile sales in the months immediately following the termination of the program."[59]

A 2013 study in the Journal of Environmental Economics and Management concluded that of the 680,000 transactions that took place under Cash for Clunkers, the program increased new vehicle sales by about 370,000 in July and August 2008, "implying that approximately 45 percent of the spending went to consumers who would have purchased a new vehicle anyway," and that "Our results cannot reject the hypothesis that there is little or no gain in sales beyond 2009."[60] A 2020 study found that the program "caused roughly 500,000 purchases during the program period."[61]

A 2013 Brookings Institution study found that the Cash for Clunkers program resulted in a modest short-run stimulus effect (specifically, an increase in vehicle production, GDP, and job creation), but that "the implied cost per job created was much higher than alternative fiscal stimulus policies" and "these small stimulus effects do not account for the depletion of the capital stock that resulted from the destruction of used vehicles."[62] The study authors noted that "consumers who participated in the CARS program did not decrease other measures of consumption to do so."[62]

A 2017 study in the American Economic Journal found that the program, intended to increase consumer spending, reduced total new vehicle spending by $5 billion.[63]

A 2009 study by researchers at the University of Michigan Transportation Research Institute evaluated the effects of the program on the average fuel economy considering a baseline without the existence of the program, since there was already a trend for buying vehicles with higher fuel economy due to the high gasoline prices of 2007 and 2008, and the economic crisis of 2008. The study found that the program improved the average fuel economy of all vehicles purchased by 0.6 mpg in July 2009 and by 0.7 mpg in August 2009.[64]

A 2010 study published in the journal Environmental Research Letters reported on the findings of a life-cycle assessment study of the CARS program. The researchers found that CARS preven

A 2010 study published in the journal Environmental Research Letters reported on the findings of a life-cycle assessment study of the CARS program. The researchers found that CARS prevented 4.4 million metric tons of carbon dioxide equivalent emissions, representing an estimated 0.4% of the annual U.S. emissions from light-duty vehicles.[65]

A 2013 study published in the Journal of Environmental Economics and Management concluded that the program reduced carbon emissions by between 9 million tons and 28.2 million tons, "implying a cost per ton ranging from $92 to $288 even after accounting for reduced criteria pollutants."[60]

A 2013 Brookings Institution study found that "the CARS program led to a slight improvement in fuel economy and some reduction in carbon emissions. The cost per ton of carbon dioxide reduced from the program suggests that the program was not a cost-effective way to reduce emissions, although was more cost-effective than some other environmental policies, such as the tax subsidy for electric vehicles or the tax credit for ethanol."[62]

A 2011 report by the American Council for an Energy-Efficient Economy noted that while vehicles purchased under the CARS program led to modest fuel economy gains—the average participant in the program purchased a vehicle with a fuel economy "2.4 miles per gallon (mpg) higher than the market as a whole and 2.9 mpg higher than they would have otherwise purchased"—Congress has missed an opportunity to push for further fuel-economy gains.[66] ACEEE wrote that "by setting more demanding eligibility requirements for the vehicles purchased, lawmakers could have increased the fuel economy benefits of the program while preserving its stimulative effect on the economy."[66]

A spokesman for the National Highway Traffic Safety Administration pointed out the newer cars purchased under the program were "considerably safer" than the older cars they replaced.[67] Consumer Reports noted that the program prompted consumers to replace older cars without electronic stability control, side curtain airbags, and tire pressure monitoring systems with more modern cars that included these safety features.[68][69]

Charities and scrap valueCharitable organizations bemoaned the program, noting the lack of repairable cars for charity purposes, and a source of revenue to fund programs.[70] A collection of charities, under the umbrella of Pete Palmer's Vehicle Donation Processing Center, reported a 7.5% decline in car donations in the month the Car Allowance Rebate System debuted.[71]

Part of the Car Allowance Rebate System bill made buyers eligible for the scrap value of the car along with the rebate, with the dealers taking in $50 of the value and to share the rest of the value to the buyer. While some dealers and Car Dealer Associations have argued that buyers were not entitled to the scrap value of the car, advocacy groups and states' Attorn

Part of the Car Allowance Rebate System bill made buyers eligible for the scrap value of the car along with the rebate, with the dealers taking in $50 of the value and to share the rest of the value to the buyer. While some dealers and Car Dealer Associations have argued that buyers were not entitled to the scrap value of the car, advocacy groups and states' Attorneys General argued that the law made it clear that buyers were entitled to the scrap value of the car. Some dealers have claimed that they did pass on the scrap value of the car to buyers.[72]

Jalopnik reviewed the lists published by the NHTSA and found numerous cars crushed under the program that had book values far exceeding the rebates offered by the government. Among some of the cars whose book value was worth more than government rebates included models ranging from the GMC Typhoon to the Bentley Continental R.[73] However, a further review noted that many cars that were thought of as being crushed under the program were improperly recorded and/or swapped for other car models or trims.[74] Some exotic/collectible vehicles were scrapped under the program included a Maserati Biturbo with 18,140 miles,[75] a GMC Syclone,[76] which was removed from scrappage in the program by a group of car enthusiasts [77] a GMC Typhoon,[77] An Isuzu Vehicross, a La Forza SUV,[74] a TVR 280i,[74] and various Ford Mustang, Ford Taurus SHO, Chevrolet Camaro, and Chevrolet Corvette models, among other cars.[78]

Ending the program

On August 20, 2009, Transportation Secretary Ray LaHood announced that the program would end at 8:00 p.m. Eastern Time on Monday, August 24.[3][4] After the announcement, several dealers decided to stop participating in the program after Saturday, August 22, due to the difficulties in processing their reimbursements through the government web site where the paperwork must be filed.[79]

Secretary Ray LaHood also commented that "it [had] been a thrill to be part of the best economic news story in America", in a news conference regarding the announcement on August 20.[80] As of early August 25, the DoT reported 665,000 dealer tran

Secretary Ray LaHood also commented that "it [had] been a thrill to be part of the best economic news story in America", in a news conference regarding the announcement on August 20.[80] As of early August 25, the DoT reported 665,000 dealer transactions corresponding to $2.77 billion in rebates.[81]

In October 2011, former Obama administration economic advisor Austan Goolsbee stated that "the administration misjudged how quickly the country could recover from the economic damage of the 2008 economic collapse" and now knowing that it has "proved a longer, tougher ride than we thought at the time", he would not have created this short-run program to stimulate the economy, but "he supports the overall stimulus program, which he claims warded off a depression."[82]