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What a waste of money.

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http://money.cnn.com/2009/10/28/autos/clunkers_analysis/index.htm

 

Clunkers: Taxpayers paid $24,000 per car

 

Auto sales analysts at Edmunds.com say the pricey program resulted in relatively few additional car sales.

 

By Peter Valdes-Dapena, CNNMoney.com senior writer

Last Updated: October 29, 2009: 12:59 PM ET

 

NEW YORK (CNNMoney.com) -- 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.

 

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."

 

In order to determine whether these sales would have happened anyway, Edmunds.com 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, Edmunds.com projected what sales would normally have been during the Cash for Clunkers period and in the weeks after.

 

Edmunds.com's estimate of the ultimate sales increase generally matches what industry experts had thought, said George Pipas, a sales analyst with Ford Motor Co (F, Fortune 500). But that misses the point, he said.

 

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

 

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 auto dealership inventories were drained of products by the program, sales this month are already back on track or better, Pipas said. "I think the October sales results will show Clunkers is behind us and there's no more payback or inventories issues."

 

Emunds.com's projection indicates that, without Cash for Clunkers, October's sales increase would be even higher.

 

First Published: October 28, 2009: 4:52 PM ET

Cash for Clunkers was an epic fail here in Parts Unknown. In fact, there are dealerships that still havent got their participation money from the government and took a massive hit in their margins.

The rebates are not a complete $$ loss. A lot of the money saved has probably been spent, at least in the case of less wealthy people who received the rebates.

Their methodology strikes me as suspect, as well. It requires an assumption that the demand for luxury cars changed in the same way that the demand for other vehicles did, yet there was no proof provided for this assumption, which may indeed be faulty.

I wasn't in favor of the program, but I don't really this article's source, either.

This is not the kind of program the government should be involved in. It is expensive and of limited value and (like most govt. programs noawadays) nowhere to be found in the powers granted to the Federal Govt. by the Constitution.

It was incredibly short sighted. All it did was create a reason for people go out and spend money they didn't have. I seriously thought about trading in my car, but when it came down to it I really didn't need one nor could I afford the raise in insurance and the car payment. I hope more people considered that as well.

  • Author

The rebates are not a complete $$ loss. A lot of the money saved has probably been spent, at least in the case of less wealthy people who received the rebates.

Their methodology strikes me as suspect, as well. It requires an assumption that the demand for luxury cars changed in the same way that the demand for other vehicles did, yet there was no proof provided for this assumption, which may indeed be faulty.

I wasn't in favor of the program, but I don't really this article's source, either.

 

They're assuming the relationship between rebate eligible and non-eligible cars is holding and I think that's a fair assumption. Why wouldn't it hold? If anything I think this assumption underestimates the number eligible cars that would have being sold anyways given that in a recession some people would be more inclined to buy cheap cars as opposed to expensive ones. If this is true then the cost to taxpayers per car is a bit higher than the $24k.

 

The purpose of the program was make the labor unions and the environmentalists happy so in that sense the program was a major success.

The rebates are not a complete $ loss. A lot of the money saved has probably been spent, at least in the case of less wealthy people who received the rebates.

Their methodology strikes me as suspect, as well. It requires an assumption that the demand for luxury cars changed in the same way that the demand for other vehicles did, yet there was no proof provided for this assumption, which may indeed be faulty.

I wasn't in favor of the program, but I don't really this article's source, either.

 

They're assuming the relationship between rebate eligible and non-eligible cars is holding and I think that's a fair assumption. Why wouldn't it hold? If anything I think this assumption underestimates the number eligible cars that would have being sold anyways given that in a recession some people would be more inclined to buy cheap cars as opposed to expensive ones. If this is true then the cost to taxpayers per car is a bit higher than the $24k.

 

The purpose of the program was make the labor unions and the environmentalists happy so in that sense the program was a major success.

 

 

 

 

 

Not exactly sure what could be faulty about the assumption, although what you mentioned is certainly one possibility. It's possible that fewer [in the correct proportion] prospective luxury car buyers have been hurt by the economic downturn to the point where they no longer by a car, relative to the same situation for non-luxury prospective buyers. Additionally, hypothetically, if someone was very wealthy and was planning to buy a Bentley, but they lost 40% of their estate, they would still have a good chance of buying a lexus. On the other hand, if your budget normally allowed a Kia, but you lost 30-40% of your estate and were unsure of your job status, then you become unlikely to buy a car at all, maybe even with the $4k credit. There's nowhere to go from a Kia, nothing cheapr [at least that's what I'm going for in my example].

  • Author

Wow, Obama is now attacking Edmunds. Last time I bought a car Edmunds was extremely helpful to the point that I was in and out of the dealer in an hour or two so hopefully Obama doesn't shut them down

Wow, Obama is now attacking Edmunds. Last time I bought a car Edmunds was extremely helpful to the point that I was in and out of the dealer in an hour or two so hopefully Obama doesn't shut them down

 

 

Do you have a link? Though I would expect and Obama "attack" to only help the views of a website and diminish the prestige of the President.

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