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Edmunds: Cash for Clunkers cost taxpayers $24k per car, not $4k
Cash for Clunkers vehicles – Click above for high-res image gallery
There is little doubt that Cash for Clunkers gave auto sales a big boost in late July and most of August, but there has been considerable debate as to how much help taxpayers' $3 billion provided. Customers who purchased a new car or truck were rewarded in many ways, especially when you consider the U.S. government paid out a median price of about $4,000 per clunker. Those customers are also saving at the pump, as each car turned in was 4-10 mpg better than the vehicle it replaced. Dealers sold more cars. States received more tax dollars. So the program was a success, right?If you believe the statistical analysis of Edmunds, perhaps the program wasn't so terrific after all. The industry research juggernaut claims that of the 690,000 vehicles sold under the program, only 125,000 of those sales went to people who weren't going to purchase a new car in 2009. The result, says Edmunds, is that the $3 billion spent for C4C ended up spurring only 125,000 sales at a cost of $24,000 per vehicle. Further, Edmunds claims that October's sales would have ramped up even more than what current projections indicate.
There doesn't seem to be too many industry experts who disagree with Edmunds' assessment that the Clunkers program only generated 125,000 additional sales, but C4C wasn't just about selling cars and trucks. Ford industry guru George Pipas told CNN Money that the Blue Oval feels the program was a success, adding "The whole purpose of the program was to provide some kind of catalyst to kick-start the economy, and by all accounts the extra production that was added this year was a boost to the economy."
While we're not entirely sure C4C was a great idea, it's hard to argue that it spurred desperately needed economic activity. Dealers were able to pay their staffs, OEMs ramped up production at plants to keep up with new demand, beneficiaries of C4C were able to upgrade their rides, and some of the road's biggest eyesores were given a sodium silicate death sentence – surely that's worth something.
Gallery: Cash for Clunkers vehicles
[Source: CNN Money | Image: Ethan Miller/Getty]
Reader Comments (Page 1 of 3)
From My Cube 11:05AM (10/29/2009)
I see their logic but at the end of the day 690,000 cars will still sold, regardless if people were going to buy a car or not, the cars were still sold
Reply
BoxerFanatic 11:20AM (10/29/2009)
And each of those cars that were sold were almost DOUBLED in price, considering the cost taken out of the economy.
So the new car buyers paid tens of thousands of dollars for a new car, and the taxpayers payed tens of thousands of dollars per new car, also.
magically, now all those corollas cost TWICE as much.
$24K is a HELL of a lot of money for the purpose of taking a running car, and stripping and crushing it.
Think about how many people could have afforded those cars if they were left at their market value, and instead the tax burden weren't incurred in the first place, and the government lowered taxes, instead.
Think about all the other programs that are going broke, and costing FAR FAR FAR FAR more than free market economics would set the value to be. Think about THAT money back in your pocket.
The US Constitution lays out the valid and legitimate functions of government, and prohibits further expansion. If the government stuck to that, as they legally are bound to... but no one enforces on the government to do...
Think about how much more money would be in your pocket to spend back into the economy, to sustain business, and how much more charitable giving people could do on their own for their own "pet causes", instead of people using the government to extort money for pet causes.
GOVERNMENT has, and continues to fail, not capitalism. Government is trying to stay afloat by holding capitalist economics underwater. Sooner or later, capitalism will drown, and the government STILL won't know how to swim, and will drown, too. Maybe if the government let capitalism swim, they would realize that it is a life guard certified swimmer.
John 11:25AM (10/29/2009)
@BoxerFanatic
I agree 110%. Let the market decide which car companies sell cars, and which ones fail, not Washington.
akboss302 11:41AM (10/29/2009)
Boxer, would that be the capitalism that sold $50 Billion worth of sub-prime mortgages to banks that couldn't back up the investment? The one that caused the housing market to collapse and brought the manufacturing sector to a standstill? The reason we in Canada didn't have nearly the same disastrous economic meltdown as what happend in the US is because our government has certain controls on a bank's capacity to lend money. For instance, 0% interest, no-money-down, 45-year mortgages to people with no proof of income and bad credit is NOT a good idea. Who would have figured?
mikesta21 12:01PM (10/29/2009)
@ak:
Please do NOT blame the subprime mortgages on free market! The CRA (Community Reinvestment Act) that essentially mandated lending to people who shouldn't have gotten loans was a government policy. The problem in the US is the wrong things are regulated in the wrong way. Fannie Mae also recieved gvmt tax incentives for purchasing mortgage backed securities (including loans from LOW INCOME BORROWERS).
@boxerfanatic.. someone who knows what he is talking about!!
askjeffro 12:09PM (10/29/2009)
@ akboss302
You must not be familiar with the regulations put into place that are pro-home ownership in America. A lot of the subprime mess was government driven through requirements of banks to lend certain percentages to minorities, lower income families, and poor credit individuals. Had these policies not been in place its unlikely that subprime would have ever manifested in the first place.
Here's a perfect example of the FHA (just one government factor in this mess) that is happening TODAY:
http://www.businessinsider.com/the-story-of-21-year-old-with-the-underwater-fha-loan-is-even-worse-than-you-think-2009-10
Don't let the media lead and fool you into believing that subprime is function of capitalism failing. The truth is much more complicated than that.
Holden Miecranc 12:19PM (10/29/2009)
@akboss302
Actually, it was government intervention in the capitalist market that lead to the mortgage meltdown. The Community Reinvestment Act of 1977 (and then expanded in 1994) forced lenders to fund mortgages for people who could not afford a house- in the name of social fairness. This was the root cause of the mortgage mess. Furthermore, the law of unintended consequences came into play, when in an effort to boost home sales, the government decided that profits on the sale of a home were not taxable, which is great for when selling your residency. However, they did not cap this to the sale of the home the seller was actually living in and thus spurred the speculative real estate market, because you could flip properties and not have the profits taxed- increasing the net profit from real estate investments vs other options. Combine this with a mortgage industry that figured it could use the same methods for hiding bad loans caused by the CRA to cover spec buyers and- whallah! FAILURE!
Moral of the story- the government can't properly run itself, let alone stick its nose in any kind of business.
akboss302 12:37PM (10/29/2009)
I guess a lot of problems in the system, both in business and government, are becoming apparent over the course of the 'economic correction'. The Canadian government is far from being perfect, but some interesting points here about the system in good ol' USA.
montoym 12:57PM (10/29/2009)
quote from akboss:
- "Boxer, would that be the capitalism that sold $50 Billion worth of sub-prime mortgages to banks that couldn't back up the investment? The one that caused the housing market to collapse and brought the manufacturing sector to a standstill?" -
Those companies wouldn't have made those loans if the gov't hadn't agreed to buy them from those companies. They didn't want that bad debt on their books, but Fannie Mae and Freddie Mac were happy to take it on so the loans were made. That's admittedly a simple view of it all, but fairly accurate.
Had the gov't left god enough alone, many of those bad loans would never have been approved. Sure, we'd have had fewer home sales, but they'd have been to more qualified buyers as well. Hardly a bad thing.
Now that lending has tightened back up again, the complaints are that it's too restrictive. Well, guess what, buying a house isn't supposed to be easy. There's was a time when putting down 20% was the norm, now people get pissy if they have to put any money down. I guess you just can't please everyone.
paul34 1:19PM (10/29/2009)
In addition, the government, via the Federal Reserve, poured a lot of new capital into banks, in order to stimulate the economy. How do banks make money? By using their money. So in addition to requirements to lend to people who, in a more unfettered environment, would have never been given loans, they also started to lend out more and more of this printed capital. Thus, your bubble. And bubbles pop. They always do. The Fed created this bubble, and many bubbles before it. You'd think someone would get the idea to fix the issue... but instead they try to strengthen the Fed. Makes you wonder whether we have humans or zombies in DC.
Steve 2:03PM (10/29/2009)
You'd have to be a moron to think minorities caused the mortgage meltdown. And if that's true, how do you explain the looming commercial real estate meltdown? Please explain to me how Fannie Mae, Freddie Mac, and minorities are causing commercial real estate defaults? Do some research and quit parroting Rush Limbaugh's talking points.
polo 2:39PM (10/29/2009)
Dumb analysis. They guestimated how many more cars were going to be sold the rest of the year, assumed all those new car buyers had used cars, and the assumed that the sales for the rest of the year would thus be near zero.
Cars are actually selling better now than before the program, proving this analysis is bogus crap put out by rightwing partisans working for Edmonds.
Level 2:55PM (10/29/2009)
"Steve 2:03PM (10/29/2009)
You'd have to be a moron to think minorities caused the mortgage meltdown. And if that's true, how do you explain the looming commercial real estate meltdown? Please explain to me how Fannie Mae, Freddie Mac, and minorities are causing commercial real estate defaults? Do some research and quit parroting Rush Limbaugh's talking points."
LOL at least someone has some sense...
This program was a success, in stimulating the economy..
as for everything else = FHA loans have and still continue to be solid loans because it's a full income loan with debt to income ratios in order to qualify for a loan, Everyone already forgot "capitalist" Wall street role in all this mess with the SISA conventional Loans which were never back by the government and instead packaged as AAA securities? Wall Street was unregulated at the time...Wall street banks were the ones originating and buying up those shady mortgages and as a result the government stepped in to bail them out due to it, does anybody have a real clue what would of happen if governt didnt stepped in and bail them out?...There was no Government intervention as some of you belief...yeah go ahead and blame the government for "structured securities" lol freaking CDO's lol financing future revenue. make up your minds people either you want government intervention or not lol damn if you do and damn if you don't........
paul34 3:07PM (10/29/2009)
Nice attempt at a deflection there, Steve. No one said anything about minorities. Lending to subprime borrowers transcends race. I'm disappointed you tried to play the race card in a debate that is supposed to involve logical arguments, not appeals to emotion.
DKB_SATX 3:22PM (10/29/2009)
@holden miecranc: While I don't doubt that there were people committing tax fraud using the home-resale tax exemption, the law does in fact limit it to your actual residence, and requires that you own your home for 5 years before you qualify for the exemption for the first $250k of profit from the sale of your home. While it contributed to the image people had of house-as-piggy-bank, it was not a boon to flippers unless they were submitting fraudulent tax returns.
bamboo 11:08AM (10/29/2009)
Great! Fox News and others are running this on the little text strip at the bottom of the screen. They don't explain it at all, just says "Tax payers paid $24k per cash for clunker sold".
I think Edmonds is just doing this to grab headlines. They should be just as happy about the sales considering it drove up visits to their site with people looking for info about cars they were considering.
Reply
JohnV 11:22AM (10/29/2009)
I am under the assumption Edmunds is run by American citizens who pay taxes to our Federal Government. If this is the case, those individuals may be a bit upset with how our government is deciding to spend its tax revenue.
Driving car sales for a few months, obviously helping several thousand businesses attached to the auto industry, may not be the best way to spend 300 Million individual citizen's tax dollars plus several hundred thousand other businesses’ tax dollars not attached to the auto industry.
montoym 1:02PM (10/29/2009)
Considering that the scroll at the bottom of the screen is pretty much made for headlines and not complete news stories, that doesn't surprise me one bit.
I'm also guessing that you didn't bother to check any other stations to see that they probably said something similar.
Judy Zik 1:04PM (10/29/2009)
This is a pretty ridiculous twist on the story. It was pretty obvious from the start that this program was going to mostly draw people who were planning on buying a car in the next year since it was in no way designed to exclude them. It was originally about clunkers but instead became an economic stimulus. As such it did it's job. Like it or not it put a lot of new cars on the road and the auto industry seems to have been in recovery mode ever since. It is pretty amazing that it managed to also get that many clunkers off the road. To say the other sales were a waste is foolish. Cars are seen as disposable by most people. In a year or two a lot of those people will be looking for new ones. If you moved their sale up a year you probably also moved up the sale of the next shinny new set of wheels a year too.
polo 2:52PM (10/29/2009)
Edmunds didn't ask a time frame when the buyer was likely to buy "the car", they didn't ask how strongly you were likely to do it in that time-frame, they didn't ask if the car would have been cheaper with no $4K credit, they didn't even ask if you would have seriously considered a used car.
Edmunds was fishing for a partisan conclusion, just to attack the program, and be featured on every rightwing tv station, radio show, and website, who all have a particular hatred for what is accepted by normal people as an incredibly successful program