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The Cash for Clunkers program was widely touted as a major success by the administration but like most things coming out of Washington that was was a fabrication.
The Automotive research website Edmunds.com did a simple business analysis of the cash for clunkers program and discovered that American Tax Payers payed an average of $24,000 to sell each additional car in the clunkers program.

A total of 690,000 new vehicles were sold under the program, all but 125,000 would have been sold anyway. Divide the the total cost of $3 billion by those 125 thousand cars and you arrive at the $24,000 figure, and the conclusion that Cash for Clunkers is was nothing but an expensive government failure.


Cash for Clunkers Results Finally In: Taxpayers Paid $24,000 per Vehicle Sold, Reports Edmunds.com

SANTA MONICA, Calif. — October 28, 2009 — Edmunds.com, the premier resource for online automotive information, has determined that Cash for Clunkers cost taxpayers $24,000 per vehicle sold.

Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as CARS, but Edmunds.com analysts calculated that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway, regardless of the existence of the program.

Ironically, the average transaction price for a new vehicle in August 2009 was only $26,915 minus an average cash rebate of $1,667.

“This analysis is valuable for two reasons,” explained Edmunds.com CEO Jeremy Anwyl. “First, it can form the basis for a complete assessment of the program’s impact and costs. Second—and more important—it can help us to understand the true state of auto sales and the economy. For example, October sales are up, but without Cash for Clunkers, sales would have been even better. This suggests that the industry’s recovery is gaining momentum.”

Actual (or Forecast)
If no Cash for Clunkers
Difference
Sales Volume
Jan ’09
9.59
9.59
n/a
654,922
Feb ’09
9.14
9.14
n/a
687,182
Mar ’09
9.69
9.69
n/a
855,146
April ’09
9.20
9.20
n/a
817,096
May ’09
9.85
9.85
n/a
923,141
Jun ’09
9.67
9.80
-0.13
857,447
Jul ’09
11.22
10.11
1.11
995,216
Aug ’09
14.06
10.45
3.61
1,258,747
Sep ’09
9.19
10.63
-1.44
744,367
Oct ’09
10.40
10.89
-0.49
n/a
Nov ’09
10.40
10.82
-0.42
n/a
Dec ’09
10.61
10.85
-0.24
n/a

“Our research indicates that without the Cash for Clunkers program, many customers would not have traded in an old vehicle when making a new purchase,” Edmunds.com Senior Analyst David Tompkins, PhD told AutoObserver.com. “That may give some credence to the environmental claims, but unfortunately the economic claims have been rendered quite weak.”

To conduct the analysis, the Edmunds.com team of PhDs and statisticians examined the sales trend for luxury vehicles and others not included in Cash for Clunkers, and applied the historic relationship of those vehicles to total SAAR to make informed estimates. These estimates were independently verified through careful examination of sales patterns reflected by transaction data. Once the numbers were determined, Edmunds.com’s analysts divided three billion dollars by 125,000 vehicles to arrive at the average $24,000 per vehicle.

Coincidentally, a parallel analysis of the first-time homebuyer credit was reported yesterday by MIT Sloan Professor Simon Johnson and Yale law student James Kwak, who both blog about economics at The BaseLine

As is its tradition the administration is figting back by bashing Edmunds rather than the facts that Edmonds presented:

“It is unfortunate that Edmunds.com has had nothing but negative things to say about a wildly successful program that sold nearly 250,000 cars in its first four days alone,” said Bill Adams, spokesman for the Department of Transportation. “There can be no doubt that CARS drummed up more business for car dealers at a time when they needed help the most.”

The Auto Industry agrees with Edmund’s estimates, but feels the program was a success anyway:

Edmunds.com’s estimate of the ultimate sales increase generally matches what industry experts had thought, said George Pipas, a sales analyst with Ford Motor Co (F, Fortune 500). But that misses the point, he said.

“The whole purpose of the program was to provide some kind of catalyst to kick-start the economy,” he said, “and by all accounts the extra production that was added this year was a boost to the economy.”

The Cash for Clunkers program is another example of what happens when the government gets involved with private enterprise…and expensive failure.

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