Cash for Clunkers Turns 15. Did It Do All It Was Supposed To? (No.)
I climbed behind the wheel of a used but loaded four-door Ford F-150 XLT pickup. It had a 5.4-liter V-8, an engine about which a mechanic friend once said, “If every vehicle came with that motor, I’d be out of business.” I checked the air and the heat; both worked. The stereo sounded good. The interior was clean.
I drove it from the back of a GM dealership to a bay in the service department. The automatic transmission shifted properly, the power steering worked, the brakes were fine. I pulled it into to the bay and handed the keys to a mechanic. He drained the oil and replaced the plug.
Then he prepared two quarts of a special oil replacement that was 40 percent sodium silicate and 60 percent water. He poured it in and started the engine. The mechanic gunned the accelerator a few times, then kept the truck idling at 2000 rpm. After about six minutes, the engine began to falter, and the mechanic applied more throttle to keep it at 2000 rpm. Soon the engine shook, rattled and died.
The truck then sat for an hour as the solution hardened. I was shaken more than I expected I’d be—this truck was nicer than the pickup I had at home that I used to tow my race car. To purposely kill it just seemed, well, cruel.
But that’s what the Car Allowance Rebate System, or CARS—known nationwide as “Cash for Clunkers”—did to 677,081 vehicles in the summer of 2009. Hard to believe it has been 15 years since the federal government funded the $3 billion program, and it has been essentially forgotten. But it was big news in 2009.
The economy was grim, with the auto industry hit especially hard after overproducing and underselling. (One Ford executive wryly confided that they were losing money on a bunch of sales, “But apparently we think we’ll make it up in volume.”) Chrysler filed for bankruptcy on April 30, 2009, with General Motors filing a month later. They got an $80 billion bailout from the federal government. Compared to that, the CARS allocation was pocket change.
But if CARS took more than 677,000 vehicles off the road, then it had to put 677,000 brand new ones back on it at a very dire moment for Detroit. New-vehicle sales were suddenly robust. Customers, trading in “gas guzzling” clunkers, got a credit on newer, more fuel-efficient vehicles. You had to buy a car with an EPA-rated fuel efficiency of at least 22 mpg, which got you a credit of $3500, or 28 mpg for a credit of $4500.
For the story I was working on, I went to multiple new car dealers to look over the collection of trades they’d taken with CARS. But there were awfully few legitimate gas guzzlers. Yes, the government said they had to average 18 miles per gallon or worse to qualify, but given the type of job the vehicle was built to handle, 18 mpg may not be so bad.
At the first lot, a Ford store, doomed CARS trade-ins included two Chrysler minivans with V-6 engines, and a very nice Ford Windstar minivan with a V-6, full leather interior, a six-disc CD player, and what appeared to be brand-new tires. Three Ford Explorers with V-6 engines, two Dodge Dakota pickups, two six-cylinder Jeep Cherokees. There was a clean Jeep Grand Cherokee Laredo with the 4.0-liter six-cylinder engine and a new set of Michelin tires, which alone probably cost at least $500.
And there was a white-over-red Ford Mustang LX convertible with a white leather interior. With a 5.0-liter V-8, it met the 18 mpg threshold exactly. Cash for Clunkers vehicles, by the way, had to be drivable—you couldn’t push your car with an already seized-up engine to the dealer and expect to participate.
I saw no land-yacht station wagons, no runout full-sized vans, no Chevrolet Suburbans, even. Relatively few of the Clunkers were, well, clunkers. The Obama administration, which backed the legislation, took it on the chin for that. Said the right-leaning Cato Institute: “Suppose each clunker was worth $3000 at a guess, that would mean that the government destroyed $2.25 billion of value.”
“Destroyed” is a bit of an overreach. Car recyclers had 180 days to part out the clunkers if they wanted, with the exception of the engine, which did have to be destroyed. (Break the rules, and there was a $15,000 fine.) Some proponents of the program complained about this—why let them sell parts if it just helps more clunkers stay on the road?—but a lot of the CARS trade-ins did indeed go straight to the crusher. A car’s engine is the most valuable piece of the vehicle to recyclers, and some passed on participating in CARS at all because of the limited amount of money they could make selling fenders off a Grand Caravan.
CARS began on July 1, 2009, and ended on August 24, after the $3 billion was exhausted. Congress originally appropriated $1 billion, figuring it would last until winter, but the money went so fast they had to ante up another $2 billion.
I followed that Ford F-150 to the salvage yard, where it was delivered the next day. Turns out they had plenty of F-150 parts and didn’t need any off this truck. It would go straight to the crusher in a few days, flattened and placed atop of a stack of crushed vehicles that looked like toy cars a child had stepped on.
Did I want to come back and watch? I did not.
Periodically, there has been talk over the years about bringing CARS back, but it appears to be one and done. In many respects, CARS played a successful role in preserving the American automotive industry; it did give the economy in general, and the auto industry in particular, a shot in the arm at a critical time. And, statistically, it did raise the average fuel mileage of the American fleet.
But did it take “clunkers” off the road? In a word, no.
I want to know who thought that a product called “Engine seize” would need to be developed.
As I recall it didn’t even sell that many Detroit cars. A lot of people bought either a Nissan Versa, the cheapest eligible new car, or a Toyota Prius, the most economical. I did the math and even if one of my cars was eligible I’d still be paying $300/month to save $50 in gas (At the time we had a Ford Escort and a Saturn SL2 which both got 24-26MPG on the road)
The car dealers were the real winners of “Cash for Clunkers”
I think California started this, and at least one “clunker” was given a reprieve: https://www.motortrend.com/how-to/1967-chevrolet-camaro-crusher-25-years/
Had to look this up. Here is what appears to be the original press release: https://ww2.arb.ca.gov/news/air-resources-board-set-rules-pollution-credits-old-cars-buses
I found this quote particularly interesting–“The Board estimates that scrapping 540 15-year old cars, for instance, could generate 25 tons per year of hydrocarbon credit by effectively cutting short the remaining six years of their estimated road life, at a cost of $400,000.”
The board is admitting that these are good usable cars with 6 years of life left on average. Throwing away something that is still functional is comical and points that those who thought of this plan had no thoughts as to how much pollution production makes. The whole scheme was designed (intentionally or not) to inconvenience normal people while giving the easy route to large corporations to continue polluting at mass scale. How disappointing.
For every real clunker we destroyed, we probably destroyed 3 other decent used cars. It was great for us because some people were so blinded by the government cash they didn’t negotiate, or bought some bad inventory (weird colors, bad options) we had. The system was so overwhelmed we hired a clerk to work at 2 am. It was the only time we could consistently file all the paperwork.
Whomever concocted this idea didn’t have a true grasp of economics. Agenda fueled foolishness and double speak. The man who was supposedly for the “people” eventually screwed many of the most vulnerable . Only the wealthy possible political donors truly benefited. Cost benefit analysis wasn’t considering societal costs that were connected to facts
I disagree with the statement that it gave the economy a shot in the arm. I believe it was Milton Friedman who said that every penny of government spending is paid for by taxes or money creation which effectively taxes every penny you have by making it worth less. Wasteful government spending’s effect is like giving adrenaline to a sick person.
We traded a 1997 Chrysler Town and Country. It looked very nice inside and out, but had a ton of electrical gremlins (as did our previous 97 Caravan). We were going to sell it and be happy with about $1500, but Cash for Clunkers gave us $4500 to trade for a 2009 Hyundai Accent. At $13.5k, minus a $1500 rebate, we got a brand new car for $7500. I drove it for 4 years, putting 32k miles on it. Traded in at CarMax and still got $6k for it. All in all, we were very happy.
I was a business manager at a Lexus dealership during cash for clunkers. Believe it or not we did have one model that qualified, the least expensive ES 300 at the time. Two of the craziest stories I can relate are these: We took in an old Ford Bronco and the engine was so loose that after adding the additive it sat in the back lot and ran for hours before it finally died. Another story that’s hard to believe is we had a Nobel prize winning university professor with a salary in excess of $1 million a year who took advantage of the program. Traded in a beat to death 4Runner. Pretty sure he was not the intended audience, but that’s the government for you The paperwork was a nightmare to administer. Fortunately, we didn’t have that many deals. Mainstream car dealers took in lots and lots of cars. I don’t know how their managers kept their sanity.
The program was wrong. It was suppose to benefit Ford, Chrysler, and GM, but it was Toyota that benefitted the most. Instead of destroying 677,000 vehicles, the government should have issued $4,000 vouchers to be used at GM, Chrysler, or Ford Dealerships to purchase a new fuel efficient vehicle and no trade-in required. I had a friend that delt in low priced used vehicles. The Cash for Clunkers put him out of business!
That would have made actual sense!
It was my understanding that the original idea for Cash for Clunkers came from Bruton Smith of Charlotte Motor Speedway and Sonic Automotive. If what I was told is right, he proposed it to the automakers and the Obama administration. Sonic Automotive owned a lot of dealerships.
The program had a terrible effect on the used car industry and removed a lot of good used cars out of the market. From what I understand, this really hurt consumers that could afford a used car, but were not in a position to by new. And the used car shortage lingered on long after the initial program.
Some of you may know more about it, but that is what I remember.
Wikipedia (yeah, I know) credits an economist named Alan Blinder with popularizing the idea in a New York Times op-ed piece from 2008.
For what it’s worth.
I heard that it was more like “Bucks for Trucks”. What a waste. This is the same government that might someday run our health care. I wonder how many of us would be considered “clunkers” and given a special “Cardio seize” drink…
🔥 Fire.
On a positive side, I used the program to preserve a 1984 BMW 635CSi. The car had 220,000 miles but was cherry otherwise. Still “book value” was under $3K. I loved that car, but I needed a new car with better gas mileage for my 60 Mile one way commute, so the BMW had to go. I listed it for $3200 and stated, “great car, great price, but if it doesn’t sell by XX date, it is going into the C4C program to be destroyed. Help preserve this future classic and buy it today.” It took a week, but I got the full amount from an enthusiast. Someone got a great car that is worth 15-20 X that today.
So typical….
Yet ANOTHER Government program that is incredibly stupid and wastes BILLIONS of taxpayer’s dollars!
My brother in law traded in a 3/4 ton Chevy that I had helped install a new Napa crate engine in the year before. He blew up his previous engine trying to pull a 400 bushel Donahue trailer without adjusting his ignition timing accordingly. He had no qualms about watching it go to the crusher only to buy a new Honda CRV. I was appalled and vowed to never help him again with vehicle issues! Some people just don’t understand what free labor is worth!!!
I drove my 1988 F 150 with no brakes (I used the e-brake to get there) and left with a 2010 Honda Insight for $15,000. (I recall receiving $5,000 not the $4,500 mentioned.) Still have the Honda 15 years later, still getting the original 44 MPG, haven’t put a dime into repairs after 175,000 miles BUT it won’t pass inspection because the rear sub-frame is completely rusted out and the rear wheels might collape at any time.