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How Much Per Car Did “Cash For Clunkers” Really Cost?

Posted by MIKKEL FISHMAN, Economics Editor in Economy.
Sep 1st, 2009 | 4 responses

And house much per house for the first time buyer tax credit?

Calculated Risk suggests that instead of $4.2k and $8k per car and house, it really is more like $7.2k and $43k if you look at the cost for increasing sales. Even if that’s true, I’m not sure it’s the proper way to look at it because the people that would have bought anyway are still saving money and may spend it on other things or use it to save. The question of how much it is helping the economy is thus more complex and dependent on what people are doing with the extra money. Still, food for thought.

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4 Responses to “How Much Per Car Did “Cash For Clunkers” Really Cost?”

GeorgeSorwell says:

September 1, 2009 at 5:59 pm

An article in Slate last week made this claim:

Cash for Clunkers, by contrast, has had a much bigger impact. According to Paul Taylor, chief economist at the National Automobile Dealers Association, the average new car sold in the United States so far this year has cost $29,106. Those 625,000 cars sold through Cash for Clunkers, then, probably account for about $18.2 billion of retail sales. They've also spurred a lot of secondary economic activity—taxes paid, dealership advertising, overtime wages for dealership employees.

And:

If we use Taylor's estimate, about 250,000 extra cars were purchased (40 percent of 625,000). And if each cost $29,000, those sales generated about $7.3 billion in revenue in the space of a few weeks. That's a pretty good return on $2.6 billion in government spending. Let's be more conservative. Say only 20 percent of the clunker traders were extra demand, and the cars they bought cost $25,000 each. That's still an extra $3.125 billion in sales for dealers. What's more, the sales represent only a portion of the economic impact. Ford, for example, announced that it is increasing production of some models.

Also, Calculated Risk ran the numbers differently last week, dollars-per-person-per-state. (Link includes a sortable chart.)
Father_Time says:

September 1, 2009 at 6:25 pm

Speaking of Cash for Clunkers, how much can we get for George Will?
mikkel says:

September 1, 2009 at 6:37 pm

Yeah at this point I find it hard to say that the program was negative…the entire program really won't be able to be analyzed for about 6 months. Critics argue that all it did was push demand forward, which may be true but is beneficial if it helps jumpstart parts of the economy. If it doesn't — well no one will be talking about it because there will be bigger problems.
adelinesdad says:

September 2, 2009 at 11:49 pm

Whether it is considered a success or not, I don't see how you can justify taking money from people who don't want to (or can't) buy cars, in order to give it to people who do want to buy cars.

I get it. We're in a recession. Drastic times call for drastic measures, etc. But why should I be punished if I don't want a new car–or if I already own a fuel efficient car? Too many people are ignoring the fact that there's no such thing as free money. It comes from somewhere. Or, to put it more accurately, it comes from someone.