So, how much longer will the Obama administration call the Cash For Clunkers program a success?
A new report from last week gives us an interesting analysis in terms of how many new car sales the program actually generated.
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 Wednesday by the automotive Web site Edmunds.com.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.
Of course, it doesn’t necessarily matter when or if these consumers planned to buy a new vehicle or not, that’s still nearly 700,000 shouldering a huge, new debt in teh middle of a bad economy. But, that 125,000 number is important in another context… Let’s consider what the government spent to create new car sales that othervise would not have happened.
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 Edmunds.com. That means the government ended up spending about $24,000 each for those 125,000 additional vehicle sales.
“It is unfortunate that Edmunds.com 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.”
So, $24,000 for each new car put on the road. That’s more than the MSRP on my new car with no additional features. So, one could look at it as though in order get 125,000 new cars on the road, the government (read: the taxpayers) had to buy 125,000 cars.
Is this something to be proud of? Are we expecting the government to subsidize car purchases just because it gets cars on the road and out of dealer lots? Where does it end if the Obama administration thinks they are seeing evidence that the only way to generate economic growth is to subsidize? They are already patting themselves on their backs over the Q3 GDP number… just what do you think they’ll justify doing next?
And who do you think is going to pay for it?
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