The Inconvenient Truth about "Cash for Clunkers": Each Car Sale to Cost Taxpayers $20k Apiece, Reports Edmunds.com
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The Inconvenient Truth about "Cash for Clunkers": Each Car Sale to Cost Taxpayers $20k Apiece, Reports Edmunds.com
SANTA MONICA, Calif. — July 27, 2009 — Much has been written — both pro and con — about the Cash for Clunkers program that officially launches today. Complexity, limited eligibility and minimal funding are common criticisms. But so far, the chief failing has been overlooked. Edmunds.com, the premier online resource for automotive information, has determined that even if Cash for Clunkers reaches its budgeted cap, the program will only help drive about 50,000 incremental new car sales, so each one will cost taxpayers a whopping $20,000.
How is this possible? Edmunds.com's research shows that typically 200,000 vehicles worth less than $4,500 are traded in for new vehicles every three months. At best the current Cash for Clunkers program will fund 250,000 such transactions in the same time period — a gain of only 50,000 vehicles. Given that this program is budgeted to cost $1,000,000,000, this increase will come at the cost of $20,000 per extra sale.
"The incremental sales will be limited and at a considerable cost. In effect, we are paying consumers to do something most would do anyway," said Jeremy Anwyl, CEO of Edmunds.com. "So as a stimulus, the program fails. One could make a slightly stronger argument about the environmental benefits, but even there, the program could have been better designed."
"Really, the best consequence is that many consumers are getting interested in the idea of a new vehicle after hearing about Cash for Clunkers; we have to hope that even if they don't qualify, they will buy a vehicle anyway," Anwyl told Edmunds' AutoObserver.com. "But, how long-lived will that be? Once the program reaches its cap, interest will die down, and sales volume will fall as quickly as it rose. What will motivate shoppers to brave the marketplace in the months following Cash for Clunkers?"
Automakers must step up to continue the momentum. Anwyl points to the current Chrysler incentive program as an example of a creative marketing message that uses the Cash for Clunkers buzz to generate sales and to arm Chrysler dealers with a useful tool when working with Cash for Clunkers "rejects."
For more information on Cash for Clunkers, please visit http://www.edmunds.com/cash-for-clunkers/. Lively discussions about Cash for Clunkers are talking place on Edmunds' CarSpace.com message boards at http://townhall-talk.edmunds.com/direct/view/.f1db290.
About Edmunds
Edmunds.com publishes four Web sites that empower, engage and educate automotive consumers and enthusiasts.
Edmunds.com, the premier online resource for automotive consumer information, launched in 1995 as the first automotive information Web site. Its most popular feature, the Edmunds.com True Market Value® , is relied upon by millions of people seeking current transaction prices for new and used vehicles. Edmunds.com was named "Best Car Research Site" by Forbes ASAP, has been selected by consumers as the "Most Useful Web Site" according to every J.D. Power and Associates New Autoshopper.com Study(SM), was ranked first in the Survey of Car-Shopping Web Sites by The Wall Street Journal and was rated "#1" in Keynote's study of third-party automotive Web sites. Inside Line launched in January 2005 and is the most-read automotive enthusiast Web site. CarSpace launched in February 2006 and is an automotive social networking Web site and home to the oldest and most established automotive community. Edmunds is headquartered in Santa Monica, California, and maintains a satellite office in suburban Detroit.
