Cash for Clunkers….You do the Math
17. Sep, 2009 
3 Comments
I was out sorting thought various news items when I came across this bit of info. It did not give any credit to the author but I thought I’d share the math on the clunkers program with our readers.
I’m really not trying to be judgmental but as they say, you do the math. Let me summarize.
Point 1
A vehicle getting 15 mpg and averages 12,000 miles per year uses 800 gallons a year of gasoline. A vehicle getting 25 mpg and averages 12,000 miles per year uses 480 gallons a year. So, the average Clunker transaction will reduce US gasoline consumption by 320 gallons per year
Point 2
Cash for Clunkers DOT officials reported 690,000 vehicles sold during the program – so that’s 220.8 million gallons per year.
That equates to saving close to 5 million barrels of oil per year. I repeat—per YEAR. 5 million barrels of oil is about ¼ (25%) of one day’s US consumption. And, 5 million barrels of oil costs about $350 million dollars at $70/bbl.
Point 3
Our Government “gave” each Clunker Trader approximately $4,500 per car for 690,000 transactions which cost US Taxpayers $2,877,000,000–not including Washington’s astounding Administrative costs.
President Obama said in his speech to auto workers in Ohio recently, “One of the other efforts we undertook was the Cash for Clunkers program. Folks said that wouldn’t work either. That program was good for automakers, it was good for consumers, and, by the way, it was good for our environment.” What I did not read in that speech was that it was good for taxpayers, and here’s why.
We all invested and paid (through our taxes) more than $3 billion+ $150,000,000 to administer, to save $350 million.
And the return on investment is….Priceless
In the end, cash for clunkers won’t significantly help automakers or the environment. It did significantly hurt auto repair shops, parts stores, charity car donation, used car sales, taxpayers, and lower income Americans.
No, cash for clunkers did not make or save any money. What it did was instill confidence in buyers and put the auto workers back to work to replace all those units. It got people excited about new products and put them in a good economic mood. This is absolutely vital for the auto industry. Yes, it costs taxpayer money, but this is the right way to do stimulus. Instead of just handing the money over, the government got people looking at cars again and put them into a buying mood. The only thing that is going to bring the industry where it should be is buyer confidence and getting people into the stores and this worked better than any tent sale.
Great point ROI was a negative. Stupid program. We could have paid off 1000’s of mortgages as well. That would have made more sense. It was a great social shuffling program that took more more from us visa vi that hidden tax called inflation and gave to an industry that is still making bad cars. Stupid is as stupid does.