Cash-for-Clunkers Will Save America $492M And 1.7M Metric Tons Of CO2. And The $$ Stays Here Instead

Given that the Cash-for-Clunker program ended yesterday, I started wondering how much it actually lived up to its promise (A Reminder Why Cash-for-Clunkers Is Such A Brilliant Idea and A Threefer: Stimulate The Economy, Reduce Foreign Oil And Help The Environment).

Based on my analysis below, I'd say it is a Threefer that far exceeded its potential.

Clunker Facts
625,000 -	# of new cars due to Clunker program as of Monday	source
12,500 -	avg miles driven per year	source
7,812,500,000 -	avg miles driven by these new cars per year
16 -	avg clunker trade's mpg	source
26 -	avg new car's mpg	source
10 -	avg mpg improvement of new car vs. clunker
63% -	avg % improvement in gas mileage
Gasoline Savings
488,281,250 -	gallons of gas clunkers needed to drive avg yearly miles
300,480,769 -	gallons of gas new cars need to drive avg yearly miles
187,800,481 -	gallons of gasoline saved annually
Economic savings
$2.62 -	Avg cost of gas - 8/24/09	source
$492,037,260 -	Gas savings - national
$787 -	Gas savings - individual
$1,000 -	Estimated savings from not having a Clunker to repair
Environmental savings
0.00881 -	metric tons of CO2 saved per gallon of gas	source
1,654,522 -	metric tons of CO2 saved per year

I belatedly found this interesting tidbit about the Clunker's stimulative effects here:

An unexpected trend is the sales to consumers who do not qualify for the government program. Chip King, from www.JerrysToyota.com, says that "over half the consumers who initially inquired about the program did not qualify but many of them bought a car anyway due to the unprecedented manufacturer and dealer incentive programs, "explains King. "We are having our best used vehicles sales month all year because consumers who don't qualify for the program are buying certified pre-owned cars," said Brian Benstock from www.ParagonCars.com. "For every vehicle sold to a consumer who is eligible for the government program we have sold another vehicle to consumers who did not qualify."

[Update] Many of the commenters below are debating the economic and energy aspects of the program. While that's true and good, folks should not forget the CO2 reducing aspect of the Clunkers program. On the environmental score alone, it's a winner ... can anyone name a more successful CO2 reduction program?

Nonetheless, it is exactly this threefer benefit (economy, energy, environment) that made Clunkers brilliant.  

•  Tip Jar

  by kloris on Tue Aug 25, 2009 at 01:45:34 PM PDT

  •  Dan Gross also thinks it helped the economy

    you can assess here: http://www.slate.com/...

    by robertacker13 on Tue Aug 25, 2009 at 01:53:17 PM PDT

  •  On the downside

    any honest accounting needs to consider the energy cost of producing the cars.

    But in my book, right now the program looks like a roaring success.

    I guess we won't really know for sure until we see how far demand for cars relaxes now the program's ended.

    by sullivanst on Tue Aug 25, 2009 at 02:04:46 PM PDT

    •  Not just the energy cost of producing the cars

      There is also a CO2 emissions cost from producing a car.

      e.g. http://www.carpoint.com.au/...

      With more efficient cars it takes a while to get back to neutral. Toyota claims

      by tiggers thotful spot on Tue Aug 25, 2009 at 03:09:45 PM PDT

      •  Energy = CO2 emissions

        At least right now it does.

        by sullivanst on Wed Aug 26, 2009 at 07:55:30 AM PDT

    •  On the upside

      The vehicles sold under CFC already existed, so their energy cost is a sunk cost whether they were sold or not.

      The only way CFC would be a net energy loser was if cars had been manufactured specifically for those sales.

      by edg on Tue Aug 25, 2009 at 03:24:54 PM PDT

      •  It was a huge success

        Did exactly what it was intended to do

        by theone718 on Tue Aug 25, 2009 at 03:50:19 PM PDT

      •  There is a knock-on, though

        The point of CFC was to clear excess inventory.

        That inventory meant that the manufacturers were stopping production lines. Now that it's gone, the production lines are rolling again.

        CFC will result in more cars being made. But that was the whole idea - get people back to work again. It'll also result in more cars being shipped in from overseas, which is a little less desirable unless you own an import dealership.

        We need the work. Desperately. But we also need to break the connection between work and CO2 emissions. That's a whole different program, though.

        by sullivanst on Wed Aug 26, 2009 at 07:58:56 AM PDT

•  Thanks - N/T

  by linkage on Tue Aug 25, 2009 at 01:46:40 PM PDT

•  More Facts

  1.) It takes a whole lot of energy to build a brand new car.

  2.) It takes a whole lot of resources to build a brand new car.

  3.) Trashing an old car creates alot of trash and toxic stuff and burns up a whole bunch more energy.

  4.) Encouraging consumption is a dubious goal for society.

  by penguinsong on Tue Aug 25, 2009 at 01:49:17 PM PDT

  •  Car Trash = recyclables

    but I do agree on some of the other stuff.

    However, it was once shown to me that the gas savings make up for the energy savings of building a new car within a little over a year.

    by Skeptical Bastard on Tue Aug 25, 2009 at 01:51:38 PM PDT

  •  Fact...

    Producing a car is a one-time energy, resource and pollution expenditure.  Removing an old car from the road is has on-going payback.  What is your alternative?

    by RichM on Tue Aug 25, 2009 at 01:52:54 PM PDT

  •  Should we just drive....

    .........old, inefficient cars because it will cost energy to build new ones?  

    We're talking about middle class jobs. Do you have a prescription for finding work for those people?  

    We can have a deep philosophical discussion about the cancer of American consumerism -- it's a worthy discussion.  But to compare a program like Cash for Clunkers to that utopian standard is not an apples to apples discussion.  

    Because God forbid we should give Obama credit for anything.  

    by 57andFemale on Tue Aug 25, 2009 at 01:59:36 PM PDT

  •  Fact... Trashing an old car "creates" nothing

    It may burn up a bit of energy, but since many of the parts are recycled or reused, it still represents a net energy saving compared to dumping the car in landfill and creating the stuff that would've been recycled from raw materials.

    The toxic stuff's already in the car, it's going to get out one way or another. It's not "created" by trashing the car.

    by sullivanst on Tue Aug 25, 2009 at 02:07:44 PM PDT

  •  At Some Level I Agree With You

    but this was "inventory" that was already just sitting on dealers lots. The vast majority of what were sold was already built.

    Plus, and I am just making an assumption as a businessperson, the dealers are not going to stock as much inventory again until overall demand increases long term.

    by webranding on Tue Aug 25, 2009 at 02:14:23 PM PDT

    •  Great points.

      The people trashing cash for clunkers by citing energy costs involved in producing new cars have no understanding of business. Those cars already existed, so any energy burder was already borne.

      by edg on Tue Aug 25, 2009 at 03:26:58 PM PDT

•  Yes.. I thought so when I first suggested it

  last November here.

  It didn't exactly start out as a cash for clunkers diary, more stimulus than gas savings, but discussions in comments got it around to that point by the end..

  Obama owes me dinner or at least a beer!

  by Skeptical Bastard on Tue Aug 25, 2009 at 01:50:01 PM PDT

•  I've been waiting for someone who knows a lot

  more than I do to talk about what this program did and what extending it might do for the US.
  I have no idea about the costs vs. benefits of this, but I'm hoping you do.
  Could this become a long-term program, that would significantly change the average fuel mileage of American cars?

  by teresahill on Tue Aug 25, 2009 at 01:50:29 PM PDT

  •  There's wisdom in targeting clunkers

    Check this post out to understand the mathematical beauty of targeting the worst performing cars.

    by kloris on Tue Aug 25, 2009 at 01:53:39 PM PDT

    •  Unfortunately

      they didn't target all the worst-performing cars. Case in point: my son's 1988 Ford Ranger, which is in its death throes, going through gas at about 10 MPG and belching blue smoke when he starts it. It was NOT eligible because it's EPA rating when new was too high. He can't afford to get it fixed. So he'll keep driving it.

      But my 2003 Hyundai Santa Fe which gets a reliable 18 MPG and is in great shape? I could've crushed it. What would've made sense is to get his truck off the road, much more than the Santa Fe.

      by el dorado gal on Tue Aug 25, 2009 at 02:24:42 PM PDT

      •  Not a perfect program, but the stats I saw

        were that people on average traded in a vehicle and bought a new one that got 10 mpg better than their old vehicle.

        by teresahill on Tue Aug 25, 2009 at 02:27:40 PM PDT

    •  Okay, I get that. But is there value in making

      this program long-term policy?
      Or are the incentives too expensive when you look at cost-benefit ratios?

      I see that the current program got 625,000 clunkers off the roads. See that we have 125 million or so vehicles on US roads classified as cars. Didn't see a total number of passenger vehicles.

      How long would we have to have cash for clunkers to make a real difference in the fuel efficiency of passenger vehicles on US roads?

      Is that something to try to convince government to do?

      No idea. Just asking.

      by teresahill on Tue Aug 25, 2009 at 02:26:36 PM PDT

      •  If This Program Was Made Permanent...

        It would amount to a regressive tax on many poor people.  At some point, taking low cost cars out of the system will cause the price of all used cars to go up, especially ones at the lowest price ranges.  This is great news for used car dealers (in the short run) and existing owners of used cars, but bad news for poor people that rely on low cost used cars.  Maybe they should all move to NYC where they can catch the subway.

        by in the Trees on Tue Aug 25, 2009 at 05:34:11 PM PDT

•  Looks like...

  A pretty good investment to me.  And those are annual dollars.  So just in repairs and gas, we will make up the investment in a little over 6 years.  Plus, clunkers tend to be heavier vehicles which produce more wear on the highway system - meaning a bigger savings too.

  by RichM on Tue Aug 25, 2009 at 01:51:26 PM PDT

•  Factor in what it takes to build new cars

  and you're looking at a slightly different picture. My guess is that there was probably a neutral or slightly positive impact. But there was a stimulative effect.

  by andgarden on Tue Aug 25, 2009 at 01:51:43 PM PDT

  •  In a capitalist society one could argue

    those new cars were going to be built anyway.  The wisdom here was motivating buyers to replace the clunkers especially.  As I just replied a moment ago, check this post to understand why.

    by kloris on Tue Aug 25, 2009 at 01:57:28 PM PDT

  •  The cars already existed.

    No new cars were producted for the cash for clunkers program. The cars sold were existing 2008 and 2009 models already in dealer inventory.

    by edg on Tue Aug 25, 2009 at 03:28:35 PM PDT

•  Well

  It was an excellent economic stimulus plan (dumping billions into the economy in days), but other than that, it's not realy clear what the benefit was.  You make a lot of assumptions in your pollution and money saved calculations, ignoring both the costs of building the new cars, and the cost of buying them (since the clunker cash was worth maybe at most a quarter of the value of a new car, people had to lay out $9 billion to get the $3 billion clunker cash and your $492 million in putative savings).  Additionally, this plan did not save the auto companies (just pushed back disaster a few weeks), did not do much to change driving patterns of average fuel efficiency, and did not cut the outflow of money to foreign companies (most popular new car: Toyota).

  It was a great stimulus plan.  Other than that...

  by weasel on Tue Aug 25, 2009 at 01:56:44 PM PDT

  •  187,800,481 gallons of gasoline saved annually

    is nothing to sneeze at.  That's a lot of money, CO2 & foreign oil being saved.  Year after year.

    by kloris on Tue Aug 25, 2009 at 01:59:55 PM PDT

    •  Yes - that is a very good point this was

      on an annual basis.  So run that out over 5 years or so and you really have an impact.

      by dr fatman on Tue Aug 25, 2009 at 02:03:18 PM PDT

      •  Well...

        Not really.  It assumes that none of the clunkers would have been retired in the next 5 years (extremely implausible), none of the new cars would have been bought, the new cars will maintain their high mileage as they age, etc.

        There are a whole lot of assumptions here, and even if you take the rosiest scenario, you are still spending $12 billion to achieve half a billion in savings.

        by weasel on Tue Aug 25, 2009 at 02:16:46 PM PDT

        •  Where'd you get $12b from?

          The whole Clunkers program was only $3b.  And the $492M savings is annual, multiply it by the average lifetime of a car to get the total savings.

          And that says nothing about the equally important benefit of 1.7m less metric tons of CO2 being released into the year every year.

          by kloris on Tue Aug 25, 2009 at 02:22:15 PM PDT

          •  Yup

            And as I estimated (guessed), the clunker cash paid for at most one quarter of a new car, so the buyer still had to lay down the extra three-quarters of the purchase price, or another $9 billion.  And as I said about pollution, your calculations assumed that all the "clunkers" were on the road before the deal and that none of them would have been traded in for new cars without this program.  I find both propositions highly dubious.  

            by weasel on Tue Aug 25, 2009 at 02:28:35 PM PDT

  •  The new cars were existing inventory.

    No cars were manufactured for the clunker program.

    by edg on Tue Aug 25, 2009 at 03:30:10 PM PDT

•  I Am Stunned The Guy Ed (MSNBC)

  has been having on isn't on more media outlets. I think he is the head of the United Steelworkers. He has been interviewed multiple times since the Clunker program started.

  In each appearance he'll say that this car plant just brought back workers. This tire plant is going back to double shifts. This steel plant is gearing up.

  The darn program worked on multiple levels and the Republicans just hate it!

  by webranding on Tue Aug 25, 2009 at 02:01:47 PM PDT

•  There are currently about 261 million autos

  on US roads.  I would love to know how many of these 261 autos qualify as a 'clunker' and then what would happen if we could remove them from the road over a 4-6 year period of time via the government 'cash for clunkers program, manufacture incentives, and private-backed incentives.

  I assume the numbers would be amazing.

  by dr fatman on Tue Aug 25, 2009 at 02:01:52 PM PDT

•  Assuming your calculations and premise...

  is correct, much of the 3 billion was wasted, and we could have increased benefit for the same price.  This law was devised when gas was at a two year low price.  With every increase in the retail cost of gas the value of a lower MPG car increases to the buyer.

  The bill should have been based on a rebate defined by a formula. It would have provided a government rebate priced after the savings of the higher MPG car. You can do the math.

  If we had provided just a nudge, enough to have used the 3 billion over the course of a year the stimulus would have been stretched out, and the benefits as you described could have been greatly increased.  

  by arodb on Tue Aug 25, 2009 at 02:03:23 PM PDT

•  I read yesterday that a similar program for large

  household appliances, refrigerators, stoves, etc. is being considered.  Purchases will only qualify for a tax break if they are energy smart appliances.

  by DEQ54 on Tue Aug 25, 2009 at 02:03:30 PM PDT

  •  Well Tax Credits Already Exist

    but they should be increased. Americans will often "do the right thing" if you give them a financial incentive to do it.

    by webranding on Tue Aug 25, 2009 at 02:06:27 PM PDT

  •  Not nearly as large

    The Energy Efficient Appliance Rebate Program is budgeted at about $300 million nationwide.  That is one-tenth of the CARS program.

    "Sick Around the World"

    http://pbs.org/wgbh/pages/frontline/sickaroundtheworld/

    Watch it, send it along to all you know.

    by oxfdblue on Tue Aug 25, 2009 at 03:09:59 PM PDT

•  On balance, I'm supportive of the program.

  My principle reservation is to wonder how many of the vehicles would have been trades/purchases simply because of necessity. If the average annual usage was 12,000 miles on the trade-ins, I think it's safe to say that they were at the very least the family's secondary vehicle and wonder how many of the deals amounted to windfalls for the buyers.

  Having said that, it's refreshing to see a government program that has an eye toward national priorities be used by so many so quickly.

  Having said that, it's sad that just because it's a government program the birther/teabag/deather community now ridicules it as an enormous failure without question. They said it, therefore it's so.

  One might hope for some serious analysis from the media, but we are dealing with our beloved media. I try to laugh to keep from screaming. The program was barely three weeks old when the story became: "OMG--they have not all been reimbursed!!!!"

  As a small business owner, I'd be in heaven to be able to close a heavily subsidized deal and expect payment within 30 days of the handshake. Not asking for or in want of a handout, bailout or any out.

  But I'm very troubled by the inequity of your line of work being so proportionate to the taxpayer support you receive to keep it working.

  by The Eyewitness Muse on Tue Aug 25, 2009 at 02:13:09 PM PDT

  •  Amen To Your Comment On Them Getting Paid

    and our media screaming about it. I've always worked for small businesses that did advertising work with billion dollar companies. If we could get paid in 30 days were were happy. Getting a company like HP or AT&T to cut you a check in under 30 days is close to impossible.

    by webranding on Tue Aug 25, 2009 at 02:17:55 PM PDT

    •  LOL, I hear you loud and clear.

      I own an advertising and design company.

      by The Eyewitness Muse on Tue Aug 25, 2009 at 02:20:41 PM PDT

      •  Oh Then You Will Love This

        I had a co-worker that was the account service person for about $2M yearly for PeopleSoft. Now they make a lot of software apps, but one was a financial management one that dealt with POs and invoices.

        In their ads we'd talk about how they'd reduce paper, make everything work better. Can you say a paperless office :). I'd see the account service person walking around with three inch ring binders with all the paper she had to fill out to get paid.

        I always found it funny, she not so much.

        by webranding on Tue Aug 25, 2009 at 02:25:22 PM PDT

•  Sales Tax

  Not every state has a sales tax and the rates vary.  In Los Angeles the sales tax is 9.75%.  For every $30,000 car purchased the state and local governments received $2,925.  A 5% sales tax helps local governments to the tune of $1,500.  Most state and local governments are in a serious bind due to the recession - what a great help!!!

  by jan0080 on Tue Aug 25, 2009 at 02:14:26 PM PDT

•  Hell yeah

  We traded in our 1985 clunker for a brand new pickup. Gets better mileage and fewer carbon emissions.  Cash for clunkers, baby.

  by rlharry on Tue Aug 25, 2009 at 02:17:40 PM PDT

•  Obama is wrong

  CARS is a horrible program that encourages people to be more fuel efficient and be conscious of how much fuel they are wasting. Is that change we can believe?
  <snark>

  by canadianpuppet on Tue Aug 25, 2009 at 02:19:58 PM PDT

•  Very effective program.

  You haven't even added in the number of jobs it created.  Jobs cut the cost of unemployment, welfare, food stamps, and keep up the value of the houses by cutting foreclosures.

  GM recalled 1,350 jobs. For every auto job, it generates 8 more so GM alone added 10,800 other jobs.  That 10,800 people who returned to work and regained their livlihood.    

  by dkmich on Tue Aug 25, 2009 at 02:23:26 PM PDT

  •  That Is So Important To Mention

    A few years ago Toyota opened a plant outside near where my parents live in Southern Indiana. Before when you'd drive into Evansville it was nothing but farm fields. Then the plant opened outside of town. Now both sides of the highway are nothing but businesses created to support the plant.  

    by webranding on Tue Aug 25, 2009 at 02:28:46 PM PDT

•  Just don't say the economy is getting better b/c

  of it or a rain of doom and gloom naysayers will chase you out of the room.  Thanks for the fact, though.

  by ecostar on Tue Aug 25, 2009 at 02:49:03 PM PDT

•  I'll take that challenge

  can anyone name a more successful CO2 reduction program?

  And respond two ways.

  First, can you name a program whose environmental return is less successful than CARS? If you made a list even specifically of GHG reduction programs, which ones would not be more successful than CARS?

  The second way I would respond is by suggesting that what this kind of analysis misses is the concept of opportunity cost. That $3 billion, give or take, could have been spent on other means of delivering the goals, as you summarize, of the threefer.

  Nonetheless, it is exactly this threefer benefit (economy, energy, environment) that made Clunkers brilliant.

  I would respond that using taxpayer dollars to replace old vehicles with new ones is a rather inefficient mechanism of helping these areas. There are a number of investments whose return would be much higher based upon these metrics, from bike paths and walking trails to commuter rail and subway lines to wind and solar energy development and so forth. Economically, things like expanded unemployment insurance, health insurance, and other safety net spending has far more bang for the buck. And energy-wise, this exacerbates a pollution-intensive form of transportation instead of subsidizing real alternatives. 26 mpg is no quantum leap; there have been cars on the road exceeding that for decades.

  Many of these vehicles would have been bought anyway, either last quarter, this quarter, or next quarter. Shifting demand over time exacerbates volatility, rather than bringing stability, because it artificially impacts the timing of consumer buying decisions.

  In short, I'd offer the opposite conclusion, that the real effect of CARS is that it spent considerable taxpayer money for marginal benefits to the environment, the economy, and energy independence. If we're doing cost-benefit analysis on this, the costs outweigh the benefits. The trick to seeing this is to understand that the bulk of the benefits are highly concentrated, while the bulk of the costs are widely dispersed.

  by washunate on Tue Aug 25, 2009 at 04:08:58 PM PDT

  •  I don't agree

    Besides ignoring the political reality that $3b for bike paths would not pass Congress and forgetting that there already was $9.3b for expanding rail in the stimulus bill, your critique is too utopian.  One could always argue that making a fundamental change in America's priorities (which is what would really be required to implement so many of your across the board changes) would be better, but that is besides the point. That would always be true but that's not going to happen.  In the real world of things Congress would pass, Clunker's was a great success.  At least IMHO.

    by kloris on Thu Aug 27, 2009 at 05:22:54 AM PDT

    •  utopian?

      Sorry, I don't follow. My critique is evidence-based.

      We spent a lot of money given the relatively small return on the investment. I'm arguing that's waste, not a good program.

      If what you're suggesting is that the only programs our political reality will allow are wasteful programs, I might tend to agree with you. But if you're arguing wasteful programs are a good investment, I dissent from that perspective.

      by washunate on Fri Aug 28, 2009 at 06:11:29 AM PDT

•  I wish that Congress would make the

  program permanent. I don't know why anyone tried to make the program permanent. You'd think that they would be rushing to support such a popular program.

  by oceanstar17 on Tue Aug 25, 2009 at 06:12:18 PM PDT