Edmunds crunches the numbers on clunker program

Cash for Clunkers was a lemon

Excerpt:

American taxpayers paid a lot of cash for those clunkers: $24,000 for each new car sold, according to a study released Wednesday.

That’s a lot of money, especially when the so-called “cash for clunker” stimulus program offered only a maximum $4,500 in cash for each person who traded in an old gas-guzzler and bought a new car.

The government could have done almost as well by just giving away cars for free, instead of creating an elaborate incentive program, according to an analysis by the automotive information firm Edmunds.com in Santa Monica, Calif.

What happened?

Well, it’s in how Edmunds crunched the numbers. A valid way to evaluate the program economically, it says, is to look at how many people purchased cars that otherwise wouldn’t have been bought. The firm says that number is about 125,000 cars. By that measure, the government spent $24,000 to generate each sale of a new car.

For comparison, the average price for a new vehicle in August 2009 was $26,915, minus an average cash rebate of $1,667.

In all, the government spent $3 billion on a program that provided cash toward 690,000 car purchases - about $4,348 per car. That makes 565,000 people who got as much as $4,500 to buy a car they would have bought anyway, according to the Edmunds analysis.

Comment: Tax cuts would a be better way to stimulate the economy!