From Edmunds.com we learn that the Cash for Clunkers program ended up costing taxpayers $24,000 per car. Wow.
SANTA MONICA, Calif. — October 28, 2009 — Edmunds.com, the premier resource for online automotive information, has determined that Cash for Clunkers cost taxpayers $24,000 per vehicle sold.
Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as CARS, but Edmunds.com analysts calculated that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway, regardless of the existence of the program.
Ironically, the average transaction price for a new vehicle in August 2009 was only $26,915 minus an average cash rebate of $1,667.
“This analysis is valuable for two reasons,” explained Edmunds.com CEO Jeremy Anwyl. “First, it can form the basis for a complete assessment of the program’s impact and costs. Second—and more important—it can help us to understand the true state of auto sales and the economy. For example, October sales are up, but without Cash for Clunkers, sales would have been even better. This suggests that the industry’s recovery is gaining momentum.”
The chart below sets forth actual SAAR (Seasonally Adjusted Annual Rate) compared to Edmunds.com’s forecasted rate if the program had never been implemented.
Actual (or Forecast) If no Cash for Clunkers Difference Sales Volumne Jan ’09 9.59 9.59 n/a 654,922 Feb ’09 9.14 9.14 n/a 687,182 Mar ’09 9.69 9.69 n/a 855,146 April ’09 9.20 9.20 n/a 817,096 May ’09 9.85 9.85 n/a 923,141 Jun ’09 9.67 9.80 -0.13 857,447 Jul ’09 11.22 10.11 1.11 995,216 Aug ’09 14.06 10.45 3.61 1,258,747 Sep ’09 9.19 10.63 -1.44 744,367 Oct ’09 10.40 10.89 -0.49 n/a Nov ’09 10.40 10.82 -0.42 n/a Dec ’09 10.61 10.85 -0.24 n/a
“Our research indicates that without the Cash for Clunkers program, many customers would not have traded in an old vehicle when making a new purchase,” Edmunds.com Senior Analyst David Tompkins, PhD told AutoObserver.com. “That may give some credence to the environmental claims, but unfortunately the economic claims have been rendered quite weak.”
To conduct the analysis, the Edmunds.com team of PhDs and statisticians examined the sales trend for luxury vehicles and others not included in Cash for Clunkers, and applied the historic relationship of those vehicles to total SAAR to make informed estimates. These estimates were independently verified through careful examination of sales patterns reflected by transaction data. Once the numbers were determined, Edmunds.com’s analysts divided three billion dollars by 125,000 vehicles to arrive at the average $24,000 per vehicle.
Coincidentally, a parallel analysis of the first-time homebuyer credit was reported yesterday by MIT Sloan Professor Simon Johnson and Yale law student James Kwak, who both blog about economics at The BaseLine Scenario.