Cash for Clunkers
Cash for Clunkers, officially known as the Car Allowance Rebate System (CARS), was a U.S. federal program implemented from June 24 to August 24, 2009. The initiative aimed to stimulate the struggling automobile industry, reduce dependence on foreign oil, and lower carbon emissions by subsidizing the purchase of more fuel-efficient vehicles. With a total funding of $3 billion, the program offered trade-in credits of either $4,500 or $3,500, depending on the fuel efficiency improvements of the new vehicle. Eligible trade-ins needed to have a combined mileage of 18 miles per gallon or less, and all were required to be scrapped.
While the program succeeded in achieving some of its goals, particularly in promoting cleaner vehicles, it faced criticism regarding its overall effectiveness. Studies indicated that it facilitated fewer than 700,000 transactions, which some argued was minimal compared to the vast number of vehicles in the U.S. Additionally, many consumers were already shifting towards more fuel-efficient cars due to rising gas prices prior to the program's launch. The program's short duration and early termination due to funding depletion highlighted both its popularity and the challenges in significantly altering vehicle ownership trends.
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Cash for Clunkers
IDENTIFICATION: US federal government program that briefly subsidized purchases of cleaner-running and more fuel-efficient vehicles
DATES: June 24–August 24, 2009
The three goals of the Cash for Clunkers program were to help reduce American dependence on foreign oil, help reduce carbon emissions from passenger vehicles, and provide a stimulus to the American automobile industry. It at least partly achieved the first two goals, but most critics, back by two studies, assert that it was essentially a failed program.
Enacted on June 24, 2009, and officially known as the Car Allowance Rebate System (CARS), the popularly called Cash for Clunkers program made a total of $3 billion available to subsidize the private purchase of more fuel-efficient automobiles, trucks, sport utility vehicles (SUVs), and vans before it was terminated ahead of schedule on August 24 because its funding had been exhausted by popular demand. The subsidies were disbursed as credits toward the purchase of only new vehicles and, depending on the magnitude of the improvement in miles per gallon (mpg) offered by the new vehicle, the individual credits were either $4,500 (for major mpg gains) or $3,500 (for lesser gains). New purchases had to cost less than $45,000, trade-ins generally had to have combined city and highway mileage ratings of 18 mpg or less, and all trade-ins were to be scrapped, not resold.
A similar program had been pursued previously by the Slovak Republic in Europe, and other countries were considering adopting such programs when the US Congress enacted Cash for Clunkers. The program’s goals were to stimulate sales in the sagging American auto industry, to reduce American dependence on foreign energy by replacing “gas guzzlers” with more fuel-efficient vehicles, and to reduce carbon emissions emanating from older, fossil-fuel-burning vehicle engines.
The program had some success in achieving the second and third of these goals. By definition, replacing low-mileage vehicles with higher-mileage vehicles, all else (such as driving distances) remaining even, reduced the US demand for gasoline and resulted in lower carbon emissions per car on the road. To the extent that some of those cars were also hybrids, which run part of the time on their self-charging batteries, the benefit was enhanced. However, critics, backed by a 2013 study by the Brookings Institute and another by Texas A&M researchers, correctly noted that the program only subsidized at most slightly more than 690,000 dealer transactions involving more fuel-efficient vehicles—a proverbial drop in the ocean for a country with more than 250 million registered passenger vehicles. Moreover, many American drivers were already being motivated to acquire more fuel-efficient vehicles by steep rises in gasoline prices in the months preceding the initiation of the program.
Bibliography
Bergman, Garry D. Cash for Clunkers and the Auto Industry: Background, Lessons, and Results. Nova Science, 2010.
Douglas, Jason. "America's Cash for Clunkers Is Back--In China." The Wall Street Journal, 9 May 2024, www.wsj.com/world/china/cash-for-clunkers-china-economy-e1c7fdac. Accessed 15 July 2024.
Fisher, Lawrence M. "Cash for Clunkers--Again?" Milken Institute Review, 24 Jan. 2023, www.milkenreview.org/articles/cash-for-clunkers-again. Accessed 15 July 2024.
Foster, Ben, and Therese Langer. Cash for Clunkers: A Missed Opportunity for Fuel Economy Gains. Amer. Council for an Energy-Efficient Economy, 2011. Digital file.
Gayer, Ted, and Emily Parker. “Cash for Clunkers: An Evaluation of the Car Allowance Rebate System.” Brookings. Brookings Inst., 30 Oct. 2013. Web. 29 Jan. 2015.
Grabell, Michael. Money Well Spent? The Truth behind the Trillion Dollar Stimulus, the Biggest Economic Recovery Plan in History. PublicAffairs, 2012.
Plumer, Brad. “Almost Anything Would Have Been Better Stimulus than ‘Cash for Clunkers.’” Washington Post, 31 Oct. 2013. Web. 29 Jan. 2015.