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, backed 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 24 Aug. 2025.

Fisher, Lawrence M. "Cash for Clunkers—Again?" Milken Institute Review, 24 Jan. 2023, www.milkenreview.org/articles/cash-for-clunkers-again. Accessed 24 Aug. 2025.

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, 30 Oct. 2013, www.brookings.edu/articles/cash-for-clunkers-an-evaluation-of-the-car-allowance-rebate-system. Accessed 24 Aug. 2025.

Grabell, Michael. Money Well Spent? The Truth behind the Trillion Dollar Stimulus, the Biggest Economic Recovery Plan in History. PublicAffairs, 2012.

Kagen, Julia. “Cash for Clunkers: Definition, How the Rebate Program Worked.” Investopedia, 7 Aug. 2024, www.investopedia.com/terms/c/cash-for-clunkers.asp. Accessed 24 Aug. 2025.

Plumer, Brad. “Almost Anything Would Have Been Better Stimulus than ‘Cash for Clunkers.’” Washington Post, 31 Oct. 2013, www.washingtonpost.com/news/wonk/wp/2013/10/31/almost-anything-would-have-been-better-stimulus-than-cash-for-clunkers. Accessed 24 Aug. 2025.