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.
At the time, I remember reading a story about a person doing the engine seize treatment to an E28 BMW 5-series. I stopped and said “Huh? What? How does that car qualify as a gas guzzler?” I went out to the government website which made simulated “window stickers” showing the estimated mileage, then I went and compared the window sticker my Dad had saved from my 1987 535is when he bought it new and the numbers weren’t even close. I routinely pull 28+ mpg highway in that car, and every time I look at the trip computer on a trip I think about how absurd it was that they’d ruin a car like this by claiming it was a gas guzzler.
I’m in the used car business and it sure made buying inventory a pain and far more expensive while it was going on but truthfully everybody was broke and not buying much anyway. A friend of mine had a salvage yard in town and was getting the C4Cs from the local Chevy dealer and some of those units were worth far more than the $3500-4500 the program paid which was perplexing, but I got a lot of good parts off of some of them. What I find amazing is that there’s still people who blame the program for the high cost of used cars even now, 15 years later.
The program basically took cars that would have gone into the used car market off the road and replaced them with economy box commuter cars. Most of the C4C cars would have done pretty good as trades and neither dealerships or customers were being forced to junk those cars but they did it anyway, part of it likely had to do with dealership incentives (kickbacks) that guaranteed profit on a C4C vs risk of selling a used car. The Government may have planted the idea and funded a program, no one was forced to use the program but they did it anyway.
You missed the basic fact that it merely drew the demand for 670,000 vehicles from the future to the present. Those who think this provided a boost to the economy should study the Broken Window fallacy.
Absolutely true!
I had a 1977 GM C-body car with a big V8 that was on its last legs. Exactly the type of car they wanted off the road. But it was too old for the trade in program, so I drove it two more years.
Stupid program hurt many of the “At risk” families I was working with at the time. These folks needed cheap transportation that could get them back and forth to work, their kids to School functions, Doctor visits, etc and this program eliminated the availability of the $3,000. car. Many cities don’t have or have very limited public transportation leaving them with no options to participating in any of the upward mobility our country should strive to provide.
If the auto makers continue at their present production rates then something along this scenario will come to the fore again. A local large GM dealer near me now has triple hoists to try to hold their inventory and around the city large fenced in raw land has all 3 majors stock parked for miles. Once hard to get cars like the C8 vette are languishing and the factory in BG is still running 2 shifts. Caddy dealers are buried. Broncos and Lightnings abound. So it sounds like more compulsory destruction of the ICE in programs like CLUNKERS once again. That said I have not seen Japanese dealers with jammed lots.
Those of us who are hardcore junkyard pickers had a real boon of great parts during the time when this program was going, but we also shed tears because so many of those vehicles should not have been in the yards yet. My friend and I still talk about a beautiful ’94 Bronco that was sacrificed for it. We got some great parts but we felt awful that it had been prematurely killed.
I spied an FJ60 and an FJ80. Those worth serious money now. Had I have known 🙁
I had a ’98 Ford Explorer for a winter rat back when the cash for clunkers program came out. I had a bonanza at the local “you pull it” finding replacement body parts for it. I got four doors, a tailgate and a bunch of miscellaneous other parts to bring it back to life. It was sad to see that most of the vehicles in the “you pull it” yard were in better shape than the Explorer that I was driving but at least they helped keep my “Clunker” on the road.
I worked for the State at the time providing vehicle values to local governments for tax purposes. After the hurricane in the summer of 2008 shut down the pipelines to the Eastern US, resale values of trucks, SUVs, luxury cars, etc. plummeted. An $6,000 SUV became a $3,500 SUV in about 3 months. I saw $40,000 Escalades (a lot of money then, now Toyota Camry money) drop to less than $25,000.
This trend started stabilizing by the winter of 2009, but the Cash for Clunkers hit at the right time for people wanting to dump their “worthless” gas guzzlers. But it had a side effect. Resale values of these vehicles started rising as well since people knew they were worth up to $4,500 trade and gas prices were returning back to normal. And this spilled over to more expensive vehicles which lead me to explaining to taxpayers how a used vehicle can “increase” in value from one year to the next.
I had a friend purchase a 4 y/o Ford Expedition for $17,000 September 2008. Decided to see about trading for a new Yukon late 2009 and the dealer was offering $21,000 trade allowance. He called me as he thought the dealer was shady as hell (which he was playing loosely with some figures). But I told him that was about right as the vehicle no one wanted in 2008, is desirable again.
But the summer of 2008, Cash For Clunkers, bail out for manufacturers, and more made for an interesting time in the auto industry.
The program wasn’t perfect, but it did largely accomplish what it was meant to, if not in the most ideal way. A few more restrictions would have netted better results and the money would have lasted longer, too. For example, limiting vehicles with poorer emissions (based on the emission levels the model would have had when new, not what the specific vehicle tested at), and/or vehicles with poorer crash safety tests. This would have targeted true “clunkers” rather than simply older vehicles that weren’t worth much.
Simply put, just one of a long history of Obama Brain Farts. Under the disguise of environmental good, it was his gift to the UAW, that has destroyed themselves. It was a bad idea from the start, the usual no accountability while spending our tax dollars and buying votes with them. Gotta stop the governmental bailouts, subsidies and giveaways of our tax dollars. Let the market and technology prevail and get the politicians out of the auto industry. Next up – the governmental EV mandates. That will be on Biden’s Brain Fart list (will be longer than Obama’s).
You realize that without that bail-out GM would be basically gone, right? I know it’s the “too big to fail” argument, but I’m in the camp that the GM bailout was worthwhile.
I’m with you, though, on EV mandates.
I agree it was a fiasco. I was mechanic for a city shop. We were next door to a Nissan dealer. They got a variety of clunker trade in. I heard these being destroyed for 2 days. Most died according to plan. Chevy small blocks were quickly turned to scrap. Literally fly apart throwing rods. Toyota’s on the other hand had to be revved virtually wide open before finally seizing. However restart efforts after several minutes many of the Toyotas would restart. One pick up to at least 4 goes at it before finally seizing but not blowing Total idiot program thought up by idiots.
All water under the bridge. WWII destroyed a bunch of very valuable old cars to keep our necessary war machine running.
‘Fact is that most of those cars were made available because of low used car prices and the need for manufacturers to sell new cars. I read many stories about how the family 300 SD went into the program, with its non working electric windows, dead A/C and foul smelling exhaust. People got good money for cars that neither they or the public didn’t want
. While I feel your pain for the working F150, there are still MILLIONS of F150s on the road. Who cares? Most of us are thinking about buying a new car, that cost maybe twice as much as the last new car purchased for a family, trying to decide between IC or Electric, or perhaps a hybrid. What will be important is the value of our run out trade that we no longer feel comfortable with, and are tired of the expense of keeping it running. I am not mourning the loss of old front wheel drive Cadillacs, rusted out Firebirds, Rotten Olds, Buicks, Chevys, or even Mercedes 300SDs that were converted to burn fry oil. The program didn’t drive up prices of used cars. The manufacturers did that with the higher prices of new cars.
Did the program work? Probably not, but it was a long time ago, and, again, who cares? It took a lot of cars off the road, but maybe not the ones that should have gone, as even with the good trade value, were owned by those who couldn’t afford a new car anyway.