Cash for Clunkers was a national program that offered rebates on the purchase of new vehicles with higher gas mileage.  Formally named The Consumer Assistance to Recycle and Save program (CARS), it was intended to help the American automotive industry by boosting sales and production while at the same time promoting a switch to more fuel efficient vehicles.  CARS was signed into law by President Obama in June 2009 and began on July 24, 2009 with $1 billion in rebates available [1].  Although funding was increased to $3 billion, high demand forced the program to end in late August, about two months ahead of schedule.  

Despite its popularity, the program has been criticized for promoting the car culture and for its low minimum fuel efficiency requirements on new vehicles.   Overall, however, consumers purchased vehicles with reasonably higher fuel efficiency over their trade-in models [2]. 

 

Rebate Requirements

Cash for Clunkers provided a voucher toward a car purchase when owners traded their "gas guzzlers" for new vehicles with better fuel economy.  Old vehicles could not exceed 18 miles per gallon (mpg) [6].  For a $3500 credit, the fuel economy of new vehicles had to exceed trade-ins by:  4 mpg (cars), 2 mpg (SUVs) and 1mpg (vans and trucks).  For a $4500 credit, the required improvements were: 10 mpg (cars), 5 mpg (SUVs) and 2 mpg (vans and trucks) [6].

Trucks and SUVs Favored

As written, the CARS bill did not encourage consumers to abandon huge, gas-guzzling vehicles.  It required only a 5 mile per gallon improvement in fuel efficiency for trucks and SUVs compared to a 10 mpg increase for cars [3].   SUV owners could therefore receive the full $4500 credit by trading for another large SUV that offered only modest gains in gas mileage.   According to the Sierra Club, "an owner of a 14 mpg gas guzzling truck could trade that vehicle in and get $3,500 taxpayer dollars toward the purchase of a 15 mpg gas guzzler" [1].  This system may benefit the American auto industry but it disregards the most efficient vehicles on the market.  

Moreover, the minimum fuel efficiency set for new vehicles was fairly low, at 22 mpg for cars, 18mpg for SUVs, and 15 mpg for vans and trucks.

 

Vehicle Sales

When Cash for Clunkers ended, nearly 700,000 old cars had been turned in, and rebate applications of $2.8 billion were submitted by the deadline, according the Department of Transportation [4].  

Still, that subsidy may not have provided much of a boost to the American automobile industry.  While Ford (along with Honda and Toyota) increased its year-over-year sales in August 2009, Chrysler and GM posted declines [5].

Did the Program Work?

Statistics from the Department of Transportation showed that consumers’ new car choices represented a 61% improvement in fuel efficiency [2].  The average gas mileage was 15.1 mpg for trade-ins and 25.4 mpg for new cars purchased with CARS rebates.  However, rather than attracting new “green” car buyers, Cash for Clunkers may have simply rewarded those who were planning to purchase a fuel efficient vehicle anyway [5].

It is also not the case that increased fuel efficiency for individual vehicles will translate into an equivalent reduction in fuel usage or carbon emissions in the aggregate. This is known as the rebound effect. Better gas mileage may be compensated for, to a certain degree, by driving more. Studies have estimated the rebound effect to be between 15 - 20%. In other words, a 100% increase in efficiency will lead to 15 - 20% more driving.[7]

 

ALSO ON THE LIVABLE STREETS NETWORK

• Streetsblog Capitol Hill:  Cash for Clunkers Coming to a Close?  August 19, 2009
  

REFERENCES

Each source is referred to by the same number every time it is cited. Please keep citation style consistent.

[1] Cash For Clunkers Online Guide. The Sierra Club.

[2] Car Consumers Get It.  Press release issued by The Sierra Club, August 6, 2009.

[3]  Clunkers Program to End August 24.  Planetizen, August 22, 2009.

[4] Car Allowance Rebate System (CARS).  U.S. Department of Transportation.  Updated September 3, 2009.

[5] Avent, Ryan.  A Last Word on Cash for Clunkers.  Streetsblog Capitol Hill, September 2, 2009. 

[6] Reed, Phillip. Cash for Clunkers Car Buying Stimulus Program.  Edmonds.com, August 25, 2009.

[7] Federal Highway Administration, Corporate Average Fuel Economy 
for MY 2011 Passenger Cars and Light Trucks. March, 2009.

PICTURE REFERENCES

Pictures are cited in the order they appear above. Please keep citation style consistent.

[1] Two SUV's.  Photo by The_Gut via Flickr.

[2]

FURTHER READING 

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