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Clunkers program analysis: few extra cars sold, pricey for taxpayers

November 16, 2010

A total of 690,000 new vehicles were sold under the cash-for-clunkers program last summer, but only 125,000 of those were vehicles that would not have been sold anyway, according to an analysis released Oct. 28 by the automotive Web site

Still, auto sales contributed heavily to the economy’s expansion in the third quarter, adding 1.7 percentage points to the nation’s gross domestic product growth.

The Car Allowance Rebate System, nicknamed the cash-for-clunkers program, gave car buyers rebates of up to $4,500 if they traded in less fuel-efficient vehicles for new vehicles that met certain fuel economy requirements. A total of $3 billion was allotted for those rebates.

The average rebate was $4,000. But the overwhelming majority of sales would have taken place anyway at some time in the last half of 2009, according to That means the government ended up spending about $24,000 each for those 125,000 additional vehicle sales.

"It is unfortunate that 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."

In order to determine whether these sales would have happened anyway, analysts looked at sales of luxury cars and other vehicles not included under the Clunkers program.

Using traditional relationships between sales volumes of those vehicles and the types of vehicles sold under Cash for Clunkers, projected what sales would normally have been during the cash-for-clunkers period and in the weeks after.’s estimate of the ultimate sales increase generally matches what industry experts had thought, said George Pipas, a sales analyst with Ford Motor Co. But, he said, that misses the point.

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

Ford was one of the biggest proponents of the cash-for-clunkers program and several Ford models were among the top sellers under the program.

While auto sales in September were hurt because the program drained auto dealership inventories, October sales were already back on track or better, Pipassaid.

"I think the October sales results will show Clunkers is behind us and there’s no more payback or inventories issues."’s projection indicates that, without cash-for-clunkers, October’s sales increase would be even higher.