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Article's URL: http://www.atv.info/article.cfm?id=888.

Cash for Clunkers, each car sale to cost taxpayers $20k apiece

Fri, Aug/07/2009

Much has been written — both pro and con — about the Cash for Clunkers program that officially launched July 27th. Complexity, limited eligibility and minimal funding are common criticisms. But so far, the chief failing has been overlooked. Edmunds.com, the premier online resource for automotive information, has determined that even if Cash for Clunkers reaches its budgeted cap, the program will only help drive about 50,000 incremental new car sales, so each one will cost taxpayers a whopping $20,000.
How is this possible? Edmunds.com's research shows that typically 200,000 vehicles worth less than $4,500 are traded in for new vehicles every three months. At best the current Cash for Clunkers program will fund 250,000 such transactions in the same time period — a gain of only 50,000 vehicles. Given that this program is budgeted to cost $1,000,000,000, this increase will come at the cost of $20,000 per extra sale.
"The incremental sales will be limited and at a considerable cost. In effect, we are paying consumers to do something most would do anyway," said Jeremy Anwyl, CEO of Edmunds.com. "So as a stimulus, the program fails. One could make a slightly stronger argument about the environmental benefits, but even there, the program could have been better designed."
"Really, the best consequence is that many consumers are getting interested in the idea of a new vehicle after hearing about Cash for Clunkers; we have to hope that even if they don't qualify, they will buy a vehicle anyway," Anwyl told Edmunds' AutoObserver.com. "But, how long-lived will that be? Once the program reaches its cap, interest will die down, and sales volume will fall as quickly as it rose. What will motivate shoppers to brave the marketplace in the months following Cash for Clunkers?"

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