Cash For Clunkers Worked Too Well?

The Cash For Clunkers program in the United States might have worked too well. Under this program, people could turn in older, less fuel efficient cars for new cars and get up to $4,500 for their old clunkers. Critics asserted that all it would do is steal future sales and provide only a temporary increase in car sales.

Well, according to Ralph Schroeder from www.aaegroup.com, car sales in September (which was the first month AFTER the Cash For Clunkers program ended) were down by 45% at GM and 42% at Chrysler. He also goes on to note that researchers at the University of Delaware added up all the benefits and costs of the program and found that there was a net COST of $2,000 per vehicle for the program (benefits were reduced gas consumption, environmental improvements and some other items). So given that 700,000 cars qualified for the program, he states “the program made the nation as a whole $1.4 billion poorer.”

The story was emailed to me, and I can’t find a link, but you can visit Ralph Schroeder’s website at www.aaegroup.com.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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Showing 6 comments
  • Cars4Charities

    Cash for clunkers actually made us more than $1.4 billion poorer when you factor in the money it cost auto repair shops and charities that rely on the revenue from car donation.

  • Credit Card Chaser

    You gotta love how the government manages to screw up almost everything they try to “fix”. Maybe eventually they will learn to just get their hands out of everyone’s business. :)

  • Jorge

    The Cash for Clunkers program seem to have been a flop and which would have worked if this program had been better managed or revised. Thanks for posting this post.

  • Kat@Dental Checkup

    I hear the Cash for Clunkers really worked well, especially for Toyota.

    The only downside was that 4 out of 5 people who used Cash for Clunkers would have bought anyways. So the average Gained Sale by the program cost about $24,000.

    Just another example of government efficiency and brain superiority ;)

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