By on October 29, 2009

(courtesy:pennlive.com)

Edmunds‘ analysis shows that only 125k of the nearly 690k vehicles sold during Cash For Clunkers were incremental. Divide the three billion the government spent by that number, and you’re left with a $24k per-vehicle subsidy of additional sales. Which Edmunds admits were largely pull-forward anyway. Edmunds’  research also shows that fewer consumers would have traded in gas guzzlers had the stimulus not existed. As a result, “that may give some credence to the environmental claims, but unfortunately the economic claims have been rendered quite weak,” according to Edmunds analysts. All hail the Potemkin Economy!

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25 Comments on “Edmunds: Cash For Clunkers Cost $24k Per Car...”


  • avatar
    john.fritz

    Ned’s Clunker (possessive gets an apostrophe Ned) looks like it has a fresh set of tailpipes on it. That thing is probably good for another 100K. Yeah, lets get rid of that car.

  • avatar
    John Horner

    Edmund’s “analysis” is nothing but guesswork.

  • avatar

    Guesswork or not, C4C was quite obviously a big waste of money.

  • avatar
    John Horner

    “All hail the Potemkin Economy!” TTAC, today

    “TTAC is not a soapbox from which to advance particular political views.” TTAC, Oct. 27th

    Cognitive dissonance anyone?

  • avatar
    Daanii2

    They just don’t make cars like that clunker anymore.

  • avatar
    Bergwerk

    I have spent enough time in the auto industry to know that pull forward programs (no matter whose money you are using) subsidize today’s business at the expense of tomorrows.

  • avatar
    Airhen

    Sounds like another fine government program!

  • avatar
    danms6

    Cognitive dissonance anyone?

    Perhaps the cognitive dissonance we’re seeing is the inability to separate fantasy (C4C is a success!) from reality (C4C did nothing) when provided with facts (it cost a ton of $$$).

    No matter which political view you try to apply to the situation, please don’t tell me that buying someone’s used car for $2k using $24k of my taxes resembles anything close to common sense.

  • avatar
    NulloModo

    One big factor that Edmunds’ analysis seems to miss is that the C4C program encouraged a lot of people who would have otherwise bought a used car to buy a new car instead, so even if there were some sales pulled ahead, or made under C4C even if they would have happened anyway, they became new car sales instead of used car sales.

    Also, overall profit on C4C sales was higher than had the program not been in operation, so it helped the dealers quite a bit, as well as manufacturers who didn’t have to load up on as many incentives, and it also helped local and state governments through increased tax revenue due to both higher selling prices and lack of a trade in tax credit.

  • avatar

    John Horner: The “Potemkin Economy” line (and link) make a primarily economic point… albeit with unavoidable political overtones. The point is that C4C created a short-term impression that the worst is over, both for the auto industry and for the larger economy. But as the numbers are beginning to show, the optimism doesn’t last.

    There are very few industry issues that one can debate without advancing particular political views. The community standards concern is simply that discussion should stay industry/auto/motorist-focused. The idea is to generate real discussion, not ideologically blindered put-downs.

    For example, I’ll accept your thesis that Edmunds’ analysis involves guesswork (isn’t “informed guesswork” the basic definition of analysis?), but where’s your alternative? What other data/analysis should we be looking at? By what measure has C4C been a success?

  • avatar
    carguy

    No doubt C4C was a waste of money but the Edmunds “analysis” seems more designed to make for a catchy headline rather than provide any meaningful insight. More sober economic analysis put the cost at around $6.5K.

  • avatar
    Pch101

    Edmund’s “analysis” is nothing but guesswork.

    Seems like it. It’s based upon comparing projected sales data for periods that haven’t yet occurred with hypothetical sales data that will never happen because it’s obviously impossible to get actual data for the non-C4C scenario.

    Without looking at the methodology, it is impossible to assess this analysis, as not enough information is provided in Edmund’s article about it. Citing it as a definitive or authoritative assessment strikes me as being just a bit premature.

  • avatar
    grog

    John Horner: +10. Of course you see that constantly bringing up the cognitive dissonance around here is like tilting at a windmill, or Terry Gilliam ever getting his movie about Quixote made.

    Pch101: another +10. Edmunds numbers may or may not be true, they might run the gambit from thoughtful, bias-free analysis of reams of data or something the pulled out of their collective ass. But it does make good headline fodder for those who have an intense dislike of all things gubmint. I know from just reading some of their assumptions that some of their assumptions look ass-pulled.

    And if it did cost each of you 24K, lemme be the first to thank you for helping me purchase my Mazda 3. Great little car. Every day I drive it to work, I take glee in noting how it probably drives many people over the edge knowing how I came by it. Makes zipping around those tight corners that much sweeter.

  • avatar
    mfgreen40

    The gov. has never been good at spending money wisely. Do we believe the 60 min. story about billions lost to welfare fraud

  • avatar
    Lumbergh21

    More sober economic analysis put the cost at around $6.5K.

    So, you are saying that the $3B in cash for clunker money produced an additional 461,538 new car sales ($3B/$6,500) out of the ~690,000 sold during the C4C time period? That seems extremely hard to believe and anything but sober. I agree that it is impossible to provide solid numbers as you are comparing what did happen with what might have happened, which obviously involves guessing what might have happened. IMO the best guess would be to look at last years sales and reduce them by the same percentage that the prior 6 months sales had fallen and take those numbers as what would have happened without C4C. If you assume that the economy has already hit bottom, that would be a worst case scenario for drop in sales without C4C or rosiest picture for how many more sales C4C produced.

  • avatar
    Bunter1

    And for fun they could put the number higher.
    $3B is what the Gov spent on clunkers not what it cost to run the program (is this where carguy’s 6.5K comes in?).

    If it was an average of 4k per clunk that would give us…(6.5k/4k)*24k=$39k per additional sale.

    Just for grins.

    Bunter

  • avatar
    dwford

    The C4C buyers had to fill out a little survey for the government. One of the questions was whether they would have bought the car without the C4C money, and if not, when they planned to be in the market. Where are the results of that survey?

  • avatar
    motron

    @ Edward Niedermeyer: Potemkin Villages were constructed with the intention to mislead. Are you suggesting that C4C was never intended to have a stimulus effect? In Steven Rattner’s recent article, C4C was clearly described as a measure meant to spur car sales. While one could argue about how successfully it achieved that goal, I think it’s hard to argue the motivation for the program.

    In a similar vein, you write, “C4C created a short-term impression that the worst is over, both for the auto industry and for the larger economy.” I am not sure for whom such an impression was created, and that sounds a lot like a strawman argument. I don’t know of anyone who had that impression. Rather, it was widely believed that C4C stimulated car sales. Whether those were pull-ahead sales, or sales that were not worth the cost, was debated (and is still debated, obviously). While some people leaned one way or the other on those debates, I don’t think there was anyone suggesting the problems were over.

  • avatar
    Pch101

    Edmunds numbers may or may not be true, they might run the gambit from thoughtful, bias-free analysis of reams of data or something the pulled out of their collective ass.

    Correct. There just isn’t enough information provided to judge it.

    But in any case, their approach misses the point. The guv’mint spent $X on the program. The intended purpose of the program was not to increase the SAAR by a given amount, but to stimulate the economy with the multiplier effect of the spending.

    So while Edmund’s conclusion may be interesting as a sidebar, it misses the point and doesn’t ask the right question. The way to assess the success or failure of the program is to determine whether some net economic benefit at all levels was achieved, i.e. whether the economic system got more than $1 of benefit for every dollar spent.

    This analysis doesn’t address that at all. It answers a question that nobody who engineered the program was asking. On that level, it’s just an elaborate strawman.

  • avatar
    George B

    The number of people who used C4C and the higher $4500 rebate to buy a significantly more fuel efficient vehicle was a surprise. Would not have guessed that people would downsize for an extra $1000. I don’t agree that C4C was a good way for the government to spend money, but it did shift the mix of cars on the road.

    I was really pissed at the number of useful light trucks that were destroyed by C4C. I don’t want a pickup bad enough to buy a new one. However, a worn beater pickup would be a great backup car capable of hauling stuff on the weekends. Sad to see the government destroy pickups and full size SUV.

  • avatar
    grog

    The C4C buyers had to fill out a little survey for the government. One of the questions was whether they would have bought the car without the C4C money, and if not, when they planned to be in the market.

    We were? We didn’t or more accurately, no gubmint survey was ever offered to us to fill out.

    But I’ll answer the question anyway: we had no intention of purchasing a car w/o the C4C dough. And we had no intention of purchasing another vehicle until we ran the 99 Celica into the ground. Thus, when we would purchase again would depend entirely on the good devices of the Toyota Motor Corporation. Could have been a year, five years or ten years.

    The number of people who used C4C and the higher $4500 rebate to buy a significantly more fuel efficient vehicle was a surprise. Would not have guessed that people would downsize for an extra $1000.

    That’s precisely what we did. Once we finally narrowed down the field to some various flavor of the Mazda 3, I had to ask myself, was the slight addition of “oomph” in 2nd and 3rd gear in the Sport’s 6speed 2.5 outweigh the increased noise in the cabin (the Hatch was way noisier, the sedan noticeably noisier over the base 5speed 2.0), the lower gas mileage *and* the $1000 bucks difference in terms of the C4C rebate.

    It wasn’t. Better gas mileage, a much quieter cabin and the $1000 bucks won the day. And quite frankly, the increased “oomph” in 2nd and 3rd gear really wasn’t all that much. I found in test drives I didn’t miss it.

  • avatar
    grog

    I don’t think there was anyone suggesting the problems were over.

    Nobody was although I eagerly await quotes and sourcing from either gubmint officials or biased pundits to support the original premise, specifically. In fact, up until this very moment, people of all persuasions have been all over the map about recovery or “problems being over”.

  • avatar
    50merc

    Goodness sake, there’s no cognitive dissonance in the Potemkin Village sentence, and it doesn’t conflict at all with the “Housekeeping” article. It’s about policy, not personality. It’s fine to have an opinion, just be respectful in expressing it.

    Acceptable: “C4C was a big waste of money.”

    Unacceptable: “C4C is typical of president Zero” or “C4C would have been worse under Bushitler”.

  • avatar
    PeteMoran

    I don’t suppose it would help to point out to Edmunds that C4C was macro- rather than micro- economics?

  • avatar
    VanillaDude

    Oh stop it!

    What we have here is a highly reputable auto reviewer publically stating that this government program was a utter waste. So, regardless of your political views, this is a disaster. Stop trying to kill the messenger here. Stop trying to put a happy spin on it.

    C4C looked like a good thing. When it was happening, folks were pretty thrilled. A lot of our public servants heralded it as the best thing that came out of the Trillion Dollar Stimulus, and it only cost a few Billions.

    Now we can see it didn’t do what we had hoped. It cost $24,000.00 per car – paid by you, your kids, and your grandkids, (even if they are not yet born.) Just be glad you didn’t discover when you turned 16, that you owed thousands in taxes because your grandfather wanted a new Studebaker, because that is what we just did to our grandkids.

    Yeah – when Grandpa wanted to help his neighbors, he actually reached into his own wallet to help out. He didn’t reach into your parent’s wallets, and your and your brother’s and sister’s wallets. You see, back then, it was considered unethical to rob from the unborn. We no longer think that way. See how “progressive” we’ve become! We play Robin Hood and get to pretend to be doing our Christian charity of helping the needy, by stealing from our kids! Biblical Moneychangers at the Temples – You’ve just met your match with this US Congress!

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