Clunker Flunker? An Observation In Hindsight

This is a guest post by Morgan Downey, author of Oil 101.

The US cash for clunkers program was designed to stimulate economic growth through the auto industry by encouraging individuals to trade in old vehicles for more fuel efficient models. The US$3 billion program ran from July 24 through August 24, 2009. The program resulted in an additional 690,114 cars being traded in. The average fuel efficiency of trade ins was 15.8 mpg and the average for the replacements was 24.9 mpg. Those receiving the clunker subsidy are supposed to be taxed on that benefit so the entire US$3 billion is not lost.

If you do the math, the saving in oil spending over the lifetime of the new vehicles could be great enough to justify the US$3 billion of taxpayer money spent. However, critics point out that the taxpayer is out of pocket for donating this one off efficiency saving to fortunate clunker owners without any benefit in return.

Now that the program is over, the data shows that there may be a single unexpected lesson.

The month after the clunker program ended, consumers continued to purchase more cars and small vehicles rather than larger light trucks and SUVs. Perhaps vehicle dealers realized that efficiency is the new best selling point - particularly as US consumers are in an increased saving mode following the severe recession? Maybe it took the surge in efficient vehicle sales during the clunkers program for this realization to become widespread? This efficiency trend, if it persists, will help the US economy better survive future oil price spikes.

Let's take it to the charts. Chart 1 shows the brief recovery in US auto sales during the short lived clunkers program.

(click to enlarge chart)

Chart 2 below shows the numbers of cars sold in the US as a percentage of total. The clunkers program achieved what US$147 per barrel could not: 57% of vehicles sold during August 2009 were cars rather than SUVs/Light trucks. This exceeded the 55% number of May08-July08 as oil prices hit record highs. What is most interesting is that the share of car sales has not collapsed to pre-clunker program levels: in September 2009 car sales accounted for 54% of total US sales.

(click to enlarge chart)

Another criticism of the clunkers program was that it encouraged the purchase of imported vehicles rather than domestic. Chart 3 clearly shows that the trend toward sales of imported vehicles has been in place for a long time and that the clunkers program barely made a difference to the trend.

(click to enlarge chart)

Conclusion: While the benefit to taxpayers may not be immediately significant, the cash for clunkers program appears to have had a halo effect on efficient vehicle sales in the US. This efficiency will strengthen the US economy against future oil price shocks and if the trend continues it is a welcome unintended benefit of the clunkers program.

I recently ran some numbers that surprised me. A recent study put the total cost of driving a Honda Civic at $0.50 per mile, assuming 10,000 miles per year. If we assume $2.50 per gallon and 30 miles per gallon, then 333 gallons per year would be consumed, at about 8¢ per mile, leaving the non-fuel costs at $0.42 per mile.

Let's assume the $20 per gallon number, pursuant to the recent book. The fuel cost per mile would increase by a factor of 8, to about $0.64 per mile, so the total cost per mile would be $1.06 per mile (assuming no other changes, which may or may not be the case).

So, if fuel prices went up eight-fold, total driving costs, pursuant to above assumptions for a Civic, would be only about twice as much. Of course, not everyone drives a Civic, and other costs would ripple through the economy, especially food related costs.

However, if our driver cut his miles driven by half, based on the above assumptions, his total driving costs for 5,000 miles at $20 per gallon would be about the same as 10,000 miles at $2.50 per gallon.

One of the problems with trying to look at the long term fuel situation in the U.S. is that most of the costs for a typical middle-class motorist are independent of the mileage driven, and largely independent of the type of vehicle, as westexas has pointed out. My own car has a long term average of 28 mpg. My wife's SUV has a long term average of 20 mpg. Yet the majority of the annual costs for both cars are very close to the same: insurance on my car is slightly higher (because it is a VW, which costs more to repair than her Ford); depreciation on her car is higher, because it is newer; maintenance on my car costs more, because it is older and is a VW; and the difference in fuel consumption is pretty much down in the noise level. Doubling the miles we drive with either car (or doubling the fuel cost) does not make much difference.

Now where fuel consumption (and price) really makes a difference is at the low end of the socioeconomic spectrum. The average motorist in this group does not buy insurance; does not renew his registration; and either does his own maintenance or neglects maintenance entirely until the vehicle dies. Such a motorist did not buy a new car under the cash-for-clunkers program. He or she never dreams of owning a new car of any kind. He buys the cheapest used car he can find. A vehicle costing $500 might only last for 10,000 miles before it dies completely, but that is only $0.05 per mile. If the same vehicle only travels ten miles on a gallon (which is quite likely, because the cheapest vehicles these days are 20-year-old gas guzzlers), the cost per mile is $0.25 for fuel, and that's nearly all of the costs.

Now where fuel consumption (and price) really makes a difference is at the low end of the socioeconomic spectrum.

Correct. Even if we assume a non-fuel cost of $2,000 per year ($0.20 at 10,000 miles), total costs per mile at $2.50 per gallon would be $0.28 (assuming 30 miles per gallon), and $0.84 per mile at $20 per gallon, a three-fold increase, so a reduction of 50% in miles driven at $20 per gallon would still be a 50% increase in total cost (as we went from $2.50 to $20 fuel). But even in this example, only a 50% increase in total costs (with a 50% cut in driving) is surprising, given an eight-fold increase in fuel prices.

An interesting point about flex car programs like the Zip Car program. They claim an average monthly saving of $600, for people who sold their cars and used Zip Car on an hourly basis. The biggest savings was due to people reducing their miles driven, when they were confronted with an actual hard cost per hour for driving.

The way the program was structured, and the time that it occurred, really gave a boost to small car sales; people driving 'clunkers' would turn them in for $4500 on a $9000 car, and then be left with a $3000 car loan, over 60 months-- rather than a $30,000 truck loan over the same time period. The lowered operating costs work to help make the monthly payment, so this was really a boost to the lower end.
One young couple I know, struggling with debt, swapped an old Jeep clunker and a large Volvo sedan for a new Subaru, on essentially an even trade. Now, they have one new car and no debt, and live in a part of town where both could take mass transit (and one must, every day now).

That was a success of the program. It is not isolated.

The program ONLY helped those who owned cars and trucks that were worth less than $4500 on a trade in. That was not the upper middle and upper classes.

Good point. I think also having a large, well-known, popular program that referred to large, inefficient cars and trucks as "Clunkers" really helped reframe the idea that such cars were desirable status symbols. Instead, more and more people are thinking of them as bad investments that they don't want to get stuck with.

Or am I being too optimistic here?

To be clear, I would in no way encourage the clunkers program to be repeated with the spending of US$3 billion. The cost was merely a wealth transfer from the future (the government borrowing money on behalf of taxpayers).

However, the benefit from the clunkers program was the insight it provided into how efficiency in oil use (and consumer behavior) can be changed.

The clunkers program achieved what US$147 oil could not in changing transportation devices. More importantly, the effect appears to have stuck to a certain extent once the program ended.

What was it in the clunkers program that can be extracted for use without US$3 billion being spent? Dohboi, I agree with your comment. It was the characterization of inefficient vehicles as being undesirable "clunkers" that was key. Emotion and popular perception rather than cold logic is huge with vehicle purchasing decisions and, as the clunker program data shows, if inefficient vehicles can be permanently presented in an undesirable light then it is effective for use in the drive toward a more efficient and secure nation.

It's rather interesting in this case, since the moral hazard argument would suggest that the program could actually encourage people to buy guzzlers since if things got really bad there might be an expectation that the gov would buy them from you.

But I think the stronger effect in this case was that people are thinking twice before running out and buying another "clunker."

I generally assume that the net energy effect will be a wash, but we will probably never know.

This brings up a new question for all at TOD and maybe a topic for a Campfire:

Are all such large spending measures doomed to increase net energy use (or at best be neutral in this regard)? If so, why exactly must that be true? If not, what kinds of spending programs would the sages of TOD institute if they were Kings and Queens of the Forest?

I disagree with your comment. The stats are out on the clunker program, almost nobody purchased a $9000 vehicle. (there are very few of those sold in the US)

Edmunds has the top 10 sellers listed, it included both Ford and Chevrolet large trucks:
This differs from the governments listing of top ten, for some reason they broke out the truck styles separately, so they didn't make the top 10 list. The full list of vehicles by type & quantity sold is at I thought I read somewhere that the average new car cost under clunkers was $20,000, but I can't find that figure now.

Your young couple's Volvo must have been worth more than $10,000 for the numbers to work on that. (Doubtful a new Subaru would go for less than $18,000 after any rebates)

I think a lot of the clunker rebates went to upper middle & upper class people. Generally no lower class people buy new cars.

Interesting analysis.

Here are my numbers:

Cost per car per year -

Insurance - 500
Maintenance - maybe 100
Fuel at 30,000 miles and 2.50 a gallon - About 2 grand.

Of course, I bought my car new, for cash, and it's a 14k econobox.

I don't agree with the thought that middle SE folks won't respond to a rise in gas prices. Perhaps not as much as the low SE folks, but there are a hundred million Americans who fit into the categories described above who will cut back driving at some point - it's an individual thing.

The rest of the costs of owning a car are irrelevant to the number.

I don't know of anybody who, when deciding whether they should cut back on driving, considers the ratio of fuel costs to all other automobile costs. It's just not how people think.

All in my opinion, of course.

I don't know of anybody who, when deciding whether they should cut back on driving, considers the ratio of fuel costs to all other automobile costs. It's just not how people think.

Which doesn't mean the costs aren't there. That is why people are saving so much with the Zipcar program. They are trading large fixed and/or hidden costs for a direct hourly cost to drive:
Fortune Magazine: Zipcar - The best new idea in business

Drivers who give up their cars and switch to Zipcar say they save an average of $600 per month. Car sharers report reducing their vehicle miles traveled by 44%, according to Susan Shaheen of the University of California at Berkeley, and surveys in Europe show CO2 emissions are being cut by up to 50% per user.

We recently downsized our family one car by getting rid of our eleven-year-old minivan. Our other car is a Prius. We figure this saves us $4000 a year in insurance, maintenance, gas and repairs. (Repairs on the minivan were beginning to get quite expensive.) We joined City Carshare in San Francisco (like Zipcars, but a non-profit) but with bikes and public transit, we have yet to need to use it.

Cash-for-clunkers was not available to us because our van, in theory, got 20 mpg. (Never, ever in reality. More like 15 mpg in the city.) Still, I don't want another ICE. I won't buy another car until I can get electric. The good news is we have much more room in our garage for our fleet of bicycles and electric bicycles.

In the UK to drive a clunker without insurance or an annual vehicle safety check or an annual tax payment of hundreds of dollars is illegal, although millions of drivers do just that.

However, with an ever expanding national network of registration plate reading CCTV cameras linked to real time look up on insurance, tax and MOT databases, the police are getting better at cracking down. When such a vehicle is found, it is often confiscated and crushed.

I have done my own analysis of cost of ownership, and in the UK a small, cheap car costs about $0.40 a mile doing 10,000 miles a year, if you buy it with cash. Fuel is about 35 -40% of that, at $8 /gallon

A big variable is the cost of insurance, which for an inexperienced 17 yo can be that vast majority of the cost of car ownership.

A big variable is the cost of insurance, which for an inexperienced 17 yo can be that vast majority of the cost of car ownership.

And which is totally independent of fuel consumed (at least, it is here).

Of course, driving without valid registration and insurance is illegal in Texas too. The last time I was run into (in 2006) the other driver had a vehicle registered in Texas (but expired), a Louisiana license with a New Orleans address, and a certificate of insurance which appeared to be valid. But an immediate phone call to the insurance company showed me it was not valid. I then phoned the Houston police. It took about ten minutes for me to persuade them to send someone out. When the officer arrived, he was very reluctant to even make a report (which I wanted to prove to my insurance company that I was not at fault). He eventually gave the other driver a ticket for a minor infringement, but ignored the expired registration, the invalid insurance, and the out-of-state license.

We don't have as many cameras, or as many police per square mile (or per thousand people) as a large city in the U.K., and they tend to ignore a lot of minor infractions, especially it looks like the offender will be unable to pay a fine. Imprisonment for road offences is reserved for major offenders.

Ralph,It looks as if you and Ird are experienceing living in area where the the enforcement of the law is getting rather spotty-I guess we will see more and more of this in other places-the cops don't want to be bothered writing tickets and making arrests if the courts can't follow thru with fines and jail sentences.

Around here though we still have enough money to lock up people who don't pay fines and the courts sieze and auction uninsured vehicles to recover costs and fines.

It is often quoted that one car journey in 10 the driver does not have valid insurance in the UK., based on accident reports. Very few illegal immigrants are able to drive legally (or are very good at driving!)

Given that insurance is so expensive as to be not an option for anyone unemployed and aged under 25, that is on surprise. There are areas in Northern cities that never really recovered from the 1970s and 1980s recession, and families are on to third generation of never having a (white market) job. Policing these areas for driving infringements is not for the faint hearted.

The UK has very low fatality rates given the density of cars (and falling). Theft of cars is way down due to better car security. Speeding on our motorways is almost universal and only occasionally punished. In other areas it is only intermittently penalised.

Car culture is not as extreme as in the US/Australia, but it is still deeply embedded in many parts of society and these people consider the legal driving constraints a major infringement of their fundamental rights to be circumvented at every possible opportunity.

the the enforcement of the law is getting rather spotty

Do you see any reason to believe it's getting worse? I haven't seen any indication of fewer police, or less enforcement.

I'd guess it's been this way for a while - the police just don't want to bother with such cases. Perhaps they actually have compassion for the very poor people involved.

Ralph - the numbers make sense to me. Back in the 90s I drove a Ford Fiesta 1.1 for several years and worked out total running costs at around 20-25p/mile for 20,000 miles a year, fully comprehensive insured and maintained. Fuel costs were about half of the total so any price changes were noticed. I also recall that average mileage over the whole year was around 37mpg, with no special consideration to how I drove. Typically a 1.1 litre fiesta is driven one way; switch on ignition and floor the accelerator to go forward. Brake as needed. (figures for a British gallon - so around 30mpg on a US gallon - on a 1985 car...). Subsequent car purchases in the last decade were influenced by the increased UK company car tax brackets on the CO2 emissions and overall car costs, which meant I chose smaller engined - and cheaper - cars to save on tax.

I made my own calculations some time ago and this is what I found out about my own car ownership costs after keeping track of all costs between summer 2007 - summer 2008.

- Live in Sweden (expensive gas), drives litte (uses public transportation for almost all trips), 8 year old car (VW Passat):

- Parking 2000 USD
- Depreciation 1500 USD
- Repair 0-1500 USD
- Insurance 1000 USD
- Gas 1500 USD
Sum = 6000 - 7500 USD

Of which gas is 1500 (20-25% of total costs).

Obviously the major costs as incurred for having (access) to a car, not for actually driving it. Used to be part of a carpool but having two small kids changes the equation. However, we hardly use the car during the weeks and a friend who makes long trips all over Sweden borrows/rents my car for these trips so in effect I'm part of a carpool of two, and sharing the costs is great!

Ird, I don't travel much any more but in my part of the world you wind up in jail or at least court pdq if you have no insurance or valid registration -and the fines are such that it's cheaper to pay the insurance-Va takes your drivers liscence in addition to a four figure fine for lack of insurance.

I do agree about the cheap cars and lack of depreciation but the twenty year old guzzlers are pretty much gone, except for a few semi collectible cars such as Mustangs-I don't see one out of a hundred of the big old Fords and Chevys and Pontiacs, etc on the road even where I live-and this area never got out of the economic pits to begin.Mid eighties trucks are still common but seldom used as commuter vehicles.

The five hundred dollar running car no longer exists for the most part-it has gone the way of the dime coffee.The el cheapo cars these days are early to mid nineties Fords and Chevys such as Cavaliers and Escorts which can be bought in fairly decent running order for low four figure prices , especially if the are somewhat ratty in the cosmetics.

Such cars actually do get fairly good mileage-twenty or so around town and twenty five on the road.

The ones with four bangers and five speeds will get in the low to mid thirties on a trip.

I recently had a hand in fixing up a 95 Cavalier for a family member-it got new carpet, a cheap paint job , brakes , tires tuneup,ac compressor,and some other odds and ends-it's a nice looking dependable car now and the entire three thousand purchase plus fix up was less than one years depreciation on a new car-and she has already driven it forty thousand miles in two years-her job is calling on customers on site.

A Honda or Toyota is a better car but the higher resale values actually make the Chevy the cheaper vehicle in her circumstances.

I expect the she will get a hundred thousand miles out of the Cavalier-it had one fifty on it when we bought it.And unless it has a heart attack , in three years or so she will get a thousand bucks for it and we will fix up a 99 or two thousand model.

Yep, that's the way to go. I myself drive a 99 Ford escort 5 speed manual transmission. BTW I think the drive train is really a Mazda, not that that makes any difference. It's fully paid for, legally registered and insured and cheap to maintain, especially if you're willing to get your hands a little dirty now and then. It easily gets over 30 mpg on the highway. I think I paid about $1700.00 for it about 2 years ago. It has needed no major repairs during the time I've had it.

Escorts of this vintage are very good cars. My '97 Escort Wagon has 142K on it. I bought it for $1300 in 2003 with 100K on it. I had to replace a broken rear spring which I did myself. Last July the alternator belt broke costing me $87 at the Ford dealer. Uses no oil but the timing belt needs replacement so I am skeptical about driving it much anymore. I have a Vibe and a couple of pickups so it mostly sits even though it is my favorite car.

As for insurance I often think of it when people complain about ethanol mandates. There are a lot of mandates that force consumption of certain goods and services in the economy. When ethanol is singled out and faulted for mandates, I know whoever is doing it doesn't know about or doesn't care about the other mandates.

Not knowing is ignorance and might be excused, but not caring raises the question: If one doesn't resent the other mandates, why resent ethanol mandates? At least filling up without ethanol does not subject one to a ticket, fine or vehicle confiscation as is the case with no insurance.

Back to Gail's article, I find it odd that government expenditure needs to be justified in terms of profit or it is bad policy. I know this is a popular concept, but it makes no sense. Government is not a profit making organization and does not keep books based on Generally Accepted Accounting principles. If it did, all it would have to do is print (electronically) as much money (profit) as it wanted to look good.

And it is odd that domestic expenditure such as the proposed health care reform like Cash for Clunkers has be be justified on a profit basis when so many other expenditures do not. Defense and war comes to mind. As do tax cuts which over the last 30 years have reduced government income which is the same thing as expenditure accounting wise.

It is the double standard that drives me up the wall. If lower incomes benefit it has to be justified in terms of revenue/profit. If upper incomes, foreign wars or banks/Wall Street benefit, no justification seems to be required. Money is spent out of expediency, few if any questions asked.


Iirc, you are a small farmer and as such you should know a couple of good retired or "on the side " mechanics and one of them should be glad to replace that timing belt for a hundred bucks cash-it takes less than half a day and the belt costs only fifteen bucks retail.

The Escort is well worth this minor routine maintainence unless it is badly rusted out or something.

And incidentally-the belt will last twice as long as the specified replacement interval nearly every time.So you might as well either drive it or get rid of it.

Furthermore supporting your friends and nieghbors rather than the dealer in town is the thing to do in terms of having a sustainable community.;)

In Texas the most popular vehicle ten or twenty years ago was the Ford F-150 truck, and full-size pickups of this kind, along with large SUVs, still account for perhaps 30-40% of commuter traffic in Houston. In "blue collar" areas of the city, such as the Ship Channel area, it could be as high as 75%. Many of these pickups are old. I personally see at least a dozen or so every day which are 15-20 years old (at least three of them belong to families who live in the same subdivision I do).

A quick search of craigslist found 145 Ford F-150 trucks currently listed in Houston for under $2000, ranging from 1976 to 1993 models. About half of them are under $1000. The very cheapest ones are not advertised, but are sold privately by word of mouth.

I know personally one family in this lowest socioeconomic group: married couple, two teenage daughters and 11-year-old son. The father is in jail. The older daughter just split up with her boyfriend and moved back home. The younger daughter is planning to marry her boyfriend ASAP. Neither daughter is in school or has a job. The son is attending school. The mother is unemployed, and has been for months. The father worked at a convenience store before being arrested. "Home" for the four in the family is a spare bedroom in a friend's mobile home. But they do have a vehicle: a Nissan Quest van about twenty years old, with bald tires, expired registration and no insurance. The mother uses it to drive to the store to buy food with food stamps, and occasionally to visit her husband's family.

What are the authorities going to do to this mother if she is pulled up driving without insurance? Fine her? She has essentially no income and no assets. Jail her? That costs the taxpayer a lot of money, quite apart from the foster care which would be needed for her son.

Oil closed at nearly $78 today. As it goes higher, I expect the number of families in this kind of position will rapidly increase, and the authorities will be unable to do anything to help them, or to get their vehicles off the road.

A vehicle is nearly a necessity in Texas, and small cars are not favored, especially by the poor. Except right on the coast, rust is not usually a problem, and vehicles built in the last twenty years do keep going pretty well, even the American ones.


I didn't know Houston was in that bad a condition, economically-I feel for the lady, given her situation, and don't really have an answer as to how to solve her problems.
Since she drives very little she probably won't cause an accident-the thing that scares me is the thought of beer swilling teenagers and ordinary old drunks on the road because the laws aren't enforced.That 's a well tested recipe for funerals-lots of them, and more than a few innocent victims among them.
But you have made me feel better that I live in one of the supposedly more backward parts of the country, economically speaking.We still have plenty of money to enforce the traffic laws-althogh lots of locals are complaining that enforcement is nowadays revenue rather than safety oriented.

I suppose that in a few years we will be in the same shape.Local deputies around here are not really too likely to ticket you for a burned outparking light bulb or other really minor infraction but the cops in some of the towns are looking with magnifying glasses for any excuse to write any ticket possible, including parking tickets, and let us not forget that marvelous new revenue tool -the traffic light camera and the light adjusted to a yellow so short you can't even say xxxx before you are running a red light.

What happens is the car gets towed to an impound lot where it'll eventually be auctioned off to pay off the impound charges. The driver will get a big fine, but good luck collecting on it. Driving without insurance can be a $1000 fine. The judge may offer community service to work off the fine instead.

I can back up your assertion about Johnny Laws being aggressive in cases of drivers without proper documents. In fact,imposing fines on traffic infractions would appear to have become a major revenue generator for city, county and state government. Over the past few months I've noted the local police have started hanging out in a the parking lot of a pool club just a few hundred feet from my house, from whence they can hide somewhat concealed from the roadway, and thus pounce on any drivers passing by on my street who run the stop sign at the three way intersection just outside my front door. In fact, the state police just moved a motorcycle squad to the city a few months back to increase traffic enforcement (and revenues from fines) from patrolling I 64. And every time I head north on US 29 to go visit my folks up in Orange, I see both state police and county mounties pulled over into somewhat concealed locations shooting radar (Green County is particularly famous for using the US 29 as a revenue stream, as it were). Virginia, like every other state at present, is looking at very serious budget shortfalls, and I think you will see increased traffic enforcement to try to make up for that.
Regarding cheap beaters for sale, my own ride is a 95 Ford Aerostar I bought for 600 bucks a couple of years ago. I like to think of it as already being broken in, with 110,000 on the odometer, pe-dented and pre-scratched, so I don't have worry about some chucklehead marring the paint job with a runaway shopping cart (or alternately, some drunk frat boy clipping a bumper). I don't use it often (visting relatives or grocery shopping) as I can walk to work in 30 minutes, and if the weather is bad, there is a bus stop just outside my front door that drops me right to my place of employ.

Pete Deer
Charlottesville, Virginia

You're correct that fuel, even at $4.50/gal, is an insignificant expense for middle class drivers, but people are more emotional than rational about gas prices. The price of gas is an immediate, in your face reminder about the costs of driving. Hybrid and compact car sales boomed in 2008 because middle class people still had money or credit, and on a gut level, they resented paying $100 to fill up their gas guzzlers.

This is why a long term tiered feebate system is important - people at the bottom of the income ladder are trapped by the buying decisions made by people further up the income ladder five and ten years before. So we have to get into the buying decision of new car buyers now in order to change the opportunities available to people at the bottom of the income ladder five years from now.

I'd prefer one that automatically moves with the present fleet fuel inefficiency - above the present average fuel inefficiency to twice the fuel inefficiency, pay a 5% fee, over twice the present fuel inefficiency, pay a 10% fee, half the present average or less, receive a 5% rebate. Any positive balance in the fund rolls over to subsidize interest on local zero emissions transport.

I really like the concept of putting a price on efficiency to make people think more seriously about it.

It is similar the vehicle effiency market idea.

I don't know where people keep getting the idea that the price of car fuel is such a big huge deal, but these numbers show - yet again - that while it may be a problem for some, for most it isn't. They also show one of the reasons why raising the price of gas/diesel has so little effect on consumption - it has little effect on overall cost.

And the numbers also show - yet again - why public transit is such a joke in terms of both utility and level of provision. The per-mile cost of riding a local bus is in much the same ballpark, and appears cheaper only because taxpayers pay for most of the fare and all of the heavy wear-and-tear on the streets. Factor in the time cost - where I live, a 20-minute drive is often a 90-minute or more bus trip if there's even a bus available near the time it's needed - and driving would often becomes cheaper enough to be a no-brainer even if the taxpayers gave away bus rides for free as they do in a few places.

Now, should availability of car fuel become an issue, there may well be another story to tell. One might guess for starters that many of the remaining civic organizations would atrophy or close because, with roundtrip time raised, say, from 40 minutes to 3 hours, there simply would no longer be enough hours available in a day to travel both to work and to a civic gathering or meeting. But that's not yet...

A recent study put the total cost of driving a Honda Civic at $0.50 per mile, assuming 10,000 miles per year.

I don't know exactly where you got that number from, but my guess the $0.50 per mile is mostly depreciation, and they are assuming you get rid of the car when it's only 5 years old or so, over which time the depreciation is the worst.

Let's assume the Civic in you example costs $20,000 and will have a vehicle lifetime of 150,000 miles. I'll throw a made up number of $5000 lifetime maintenance in there. And, assuming your stated 10,000 miles a year (which is currently well below average), the car would last 15 years to 150,000 miles. I'll say $1000 a year for insurance. (Probably above average)

Vehicle lifetime costs are $20,000 for the car purchase plus $5000 maintenance plus $15,000 insurance plus $12,500 for gas based on your numbers totals $52,500 for 150,000 miles, or 35 cents a mile, not 50 cents.

Your point still stands. 8 cents per mile out of a total of 35 cents a mile to operate the vehicle is still a relatively small part of the total cost. My only point is that I think the $0.50 a mile average cost is unreasonably high for the lifetime of the car.

Here's the study:

Actually, I did make a mistake. The 50¢ per mile cost was for 15,000 miles per year. The 10,000 mile cost would be 68¢ per mile. Both calculations are over a five year period. The cost per mile in subsequent years would presumably be less as depreciation fell, although repairs would increase. Note that they are assuming some escalation in fuel prices.

Here is the chart for 15,000 miles. Part of depreciation is related to mileage, but only about 20% of the total is directly tied to miles driven--fuel, maintenance and repairs. One can see how people save so much money with the Zipcar like programs.

They show five year fuel costs of $4,880. If we subtract this out and add $40,000 for fuel, we get a per mile cost of 97¢ per mile (at 15,000 miles per year), again assuming no other changes. So, basically the math is the same. An eight fold increase in fuel would double the total per mile cost.

FYI, a luxury Hummer H2 would be $1.30 and $1.78 respectively per mile (10,000 miles & 15,000 miles per year), at current fuel prices.

Well cared for Hondas and Toyotas are seldom scrapped at less than 250,000 miles unless except of they are seriously damaged in accidents.

Clunker Flunker? In Hindsight, Perhaps Not

It's still a flunker! It supports the continuation of BAU and the myth that we can continue with our drive through culture. Well, we *CAN'T*!!!

FMagyar you say

we *CAN'T*!!!

Why not? As long as there is fuel and cars this will continue.

I really like driving around and because I have a car I see no reason to change my habbits.

While I drive I think about stuff like this:

Central Banks, pie, money, upfront energy, history,internet.

Central Banks were created to help our gouvernments to run our sociëty.
It took us from the first bank until 1951ad to stabilize the system and make it what it is today.

Sharing the pie is what this is all about, sharing needs a controller and present day US were given that honour after ww2.
Offcourse "friendly" Central Banks got more pie than others and this has lead to some tentions between nations.
But nowadays most central banks comply to the rules. Because the pie is getting smaller and more nations have joined the party. Democratizing surplus resource nations have helped to increase/stabilize the pie in the last 20 years. But it seems like things are peetering out at this point.

When everybody is already sharing there is no need to go there and take it. Also keep in mind that war is some sort of investment which needs a lot of (upfront) energy. So if going there cost more than you can take....why make the effort?
Have we ever invaded a country for their "paper"money?

The whole world has been explored and there isn't much left. The remaining energy is very expensive (papermoney or upfront energy?,take your pick!) to develope.

To conclude: A lot of our present day actions and thoughts originated a long time ago. We have made small and big steps all along the way, some were bright ideas others were just improvements of those bright ideas. It took us centuries to get here and if we don't change thinking we can lose this in a few years. (unplug your home from the grid is a nice way to explore this)
The internet gives us the "power" to figure this out and our journey hasn't ended yet. As long as there are places like this (tod) and many other places where creative thinking takes place combined with accumulated data reports, history and some common sense. I see no reason why we can't come up with something new. Changing our way of thinking costs nothing! But it can save a lot of energy. This energy we can use to ..... ahh something sustainable for the next 60 years would be a nice start.

For people in the denial pfase or already in the depression phase, I would like to add this thought:
Is our future about all the things we won't have.
Or can we shift towards thinking about all the things we can have.

It's (y)our choice.

Gotta go I need a haircut.

Look, I understand where you are coming from, unfortunately however much you like driving, ( I still have to drive too), it doesn't follow that we can continue with our unsustainable life styles. To promote that lifestyle is just to go down the wrong side of the fork in the road. It is a dead end. Sure a lot of people will be driving as long as they have access to fuel. I don't expect it to run out tomorrow. I'd just like to see more productive things done with our dwindling resources and finances than shoring up our current ways. I also understand that my views are most certainly not accepted as mainstream. I'm for paradigm shifting. I do not support the status quo.

F Magyar is right on the money. And the biggest halo effect of this utterly stupid and wasteful expenditure of public money is the halo it puts around the idea that cars-first transportation is a viable institution, that all we need to do is slightly downsize our cars.

That $3 billion could have restored a lot of abandoned rail infrastructure or provided bicycle-only roadways for a whole major city.

Agree with you wholeheartedly.
The Wealth Gap and the Collapse of the U.S.

I wonder a bit.
How many people trading the clunkers were going to trade anyway?
What happened to the clunkers?
Were they purchased by people to obtain a second car, so they will still be driven?
Were the clunkers purchased by people with a better MPG vehicle because they needed a bigger or a particular type of vehicle?
Will the drivers after trading their clunkers, now with better MPG vehicles, drive more because they can and thereby offset the gains?

Hear! Hear! FMagyar! Cycles, or mass transit, or car-share, or a number of other alternatives "for Clunkers" would have been a much wiser investment. A program that envisions only a one-for-one exchange is symptomatic of the poor thinking that pervades our government and our society. They might at least have allowed for trading in four "clunkers" for one car-pool van.

The "Clunkers" program had no calculus for miles driven. An inefficient automobile that had been driven 10,000 miles per year was equivalent to an equally inefficient automobile that was driven 30,000 miles per year. Certainly, the annual miles driven would have been an indicator of how the replacement vehicle might be used, and compensation might have been adjusted accordingly. As it is, the "Clunkers" program provides no accounting for Jevons Paradox.

Programs should be intent on decreasing the maintenance burden of our inefficient system and its overbuilt infrastructure. Fewer miles driven should be a central goal of our society. Greater mpg is simply a delusion.

I strongly agree.The older cars and trucks traded were mostly well past the point at which they were in regular daily use according to local gossip in the trade-the lawyers and bankers treded in thier elderly hunting and fishing and second and third property utility vehicles-notably a pickup in one case that was kept on "standby duty "on a local farm and was driven less than once a month for the last ten years or so.The cash value of that old truck was probably not over eight hundred dollars.

Some others were on thier very last legs and in need of repairs that would have necessarily resulted in being scrapped anyway.We considered treading our ninety two Ranger truck-and the salesman was very clear-as long as the paper work was in order the dealer would send a tow truck-about the only thing that mattered was that it be more or less complete-the engine transmission and wheels had to be there.

In the end we decided that the Ranger will probably last longer than we will and that we most likely could not recover even a tenth of the net costs of trading up, given that increased property taxes, insurance premiums, and loss of interest income on the purchase money would more than wipe out any potential savings in fuel purchases, leaving only potential savings in maintainence costs to justify the purchase.

But the real crime(other than the additional corporate /big labor/middle class welfare handout) was setting the mileage standard so low-some vehicles that would have remained on he road another year or two at 17 mpg were traded for new ones that get 19 and will be on the road for twenty years or more, and being new, will be driven many many more miles.

If a vehicle traded as a clunker had been kept in service for four or five more yearswhile being driven occasionally and then replaced with a new vehicle, chances are that the 20 14 model really would be a fuel saver.

People not into the industry or short of money simply don't get the fact that older cars and trucks for the most part are not driven a lot of miles in comparison to new ones.

Your local govt agencies, your local businesses, your local farmers, or your local redneck-the situation is the same.If there is and old truck and a new one,the old one sits until both are needed the same day.Ditto the family cars if a family has two or three-you gotta run the new one at least til the warranty is shot and you bought it anyway BECAUSE you wanted to be seen driving it and because it is new and shiny and comfy.The odds are high that the second or third car or truck either sits in the drive or makes the much shorter commute and is reserved for such trips as may dirty or scrath up the new one-trips to the building supply or dump or garden center or a local fishing trip,etc.

Suggesting that the public or dealers have changed buying habits as a result of the clunker of a clunker of a rebate deal is unsupported speculation-people are short of money these days and cutting back in many respects-a smaller and more fuel efficient car or truck purchase is much better explained by this overall trend of economizing across the board.

Bottom line-the whole deal was corporate welfare with a fig leaf of environmental justification.

Spending the same amount of money on subsidizing the energy efficiency of essential public buildings such as schools would have saved a lot more energy over the long run and been fair to everybody.

And GM is finished anyway-all the advertising in the world will not get back the customers who have bought new GM vehicles over the last couple of decades and wish they hadn't.People are buying hondas and Toyotas now because thier big brothers and sisters and friends bought Hondas and Toyotas ten or fifteen years ago and put three hundred thousand miles on them w/o major repairs in many , many cases.

The old brand loyalty died with my parents generation-half the middle aged rock ribbed buy American farmers and construction people my age are driving imports-including me.The 92 Ranger is a good truck but it is not as good as the 84 Toyota, which gets better mileage and costs less to maintain.

Sometimes people enjoy driving a new car more than driving a clunker. I suspect this means that the cash for clunkers program encouraged people to drive more than before. If so, the excess driving would work against the environmental goals of the program.

"the whole deal was corporate welfare with a fig leaf of environmental justification."
Don't know if that's a line of your own farmer mac, but it's a classic!

That one might actually be original with me in the sense that I didn't lift it from someone else, at least in respect to the clunker program.

But almost all or all of my good lines are from the mental attic-the problem is that they have been there so long I can't often identify thier origins.I often assume that quotes are truisms or hoary old sayings without known authors and get called on doing so-but I haven't yet been sued for doing it.Anyway,a lawyer with enough sense to check out my net worth won't bother.;)

If you look at this policy on an individual level that inclusively looks at the embodied energy of materials/labors/fossil fuels, it flunks. I'm especially curious about how the cars were recycled (or not). The policy is even worse if you look at it on a systems level, mostly because it promotes BAU. As a result of this policy, we sell more cars, we re energize and sustain defunct car companies, we redirect future wealth in the form of quantitative easing that could have been used instead to create sustainability in terms of mass transit, we send a message to the populace that sustaining the American way of life is non-negotiable, and we put Americans further in debt both collectively and individually.

Is it possible that most people in this country own their last cars? And maybe the next iteration will be an electric bike? I'm glad we have so many school buses; we're going to need them to expand the bus system in this country when we get our first oil shock.

Is there any tax on car sales in the US? In Europe we have VAT which I think averages out a bit less than 20% so the government gets something back in taxes. In some countries there is also an additional car tax.

So, we will have scrapped cars with very little debt and quite likely taken out new debt for the new cars and mostly just pulled forwrd some sales.

This was a horrible program:
1. It takes a substantial amount of energy to
build a new car. You need to add this in,
a. Energy to build new car plus energy (fuel
use) for new car vs.
b. Just Fuel use for old car.
2. Most of the autos bought would have been
bought anyway, they were just bought a few
month sooner.
3. This substantially raised the cost of
used cars, very negatively impacting the
poor. So you might have the poor continuing to
use a 10 mile per gallon poorly maintained
car--instead of replacing it with a somewhat
better 15 mile per gallon car.

If you had tried to take advantage of the program, you no doubt found out what worked best: trading in a $4500 clunker not for a 15mpg truck or SUV that cost $25,000 to $30,000, but a for $9000 to $12,000 car that got 30mpg, and left you with a very affordable car payment. Look at the cars which sold out first (and they were cars, not trucks). Yes, the used price of a 2006 Ford Taurus went from $8200 in the July 2009 NADA to $8250 in the October 2009 NADA-- but the cash for clunkers program put new cars in the reach of thousands of families who could not otherwise afford them-- and who need reliable transportation to keep and/or find a job.
Can anyone identify the last time that you read stories about the Chevy Aveo and the Ford Focus being sold out at dealer's lots-- that is, when gas was below $2.50/gal?

There is a retail sales tax on new vehicles in individual states. For example, the sales tax (not just on vehicles, but on most retail goods) in New York State is just over 8%.

There is also a federal (nationwide) tax called the gas guzzler tax which, contrary to its name, encourages SUV and heavy vehicle sales rather than small light cars.

the gas guzzler tax which, contrary to its name, encourages SUV and heavy vehicle sales rather than small light cars.

Could you elaborate on that?

Hi Nick. Here is an elaboration on the gas guzzler tax.


The retail sales tax is paid to the state and local governments, and it's typically 6-10%. The road tax in UK is called vehicle registration here, paid annually. That varies widely from state to state, but in California it's 1% of the purchase price and depreciated every year.

The federal government will actually lose tax revenues on car sales this year. One of the less well known stimulus programs is the income tax deduction for sales tax paid on new car purchases.,,id=205863,00.html

My biggest beef against the Cash For Clunkers program is that the money could have been used to build much more energy efficient transportation than cars, i.e. electrified rail.

It is estimated that the cost for electrifying existing rail($10 million per mile) would cost as much(more) as to build new rail for diesel($6 million per mile).

The efficiency of Amtrak diesel passenger trains is about the same
as cars going long distance( 2.2 x 18) ~40 passenger miles per gallon. A Prius hybrid with one passenger getting 45 mpg would be more efficient.

During WW2 when there was severe gas rationing and every available seat on trains were taken on trains the efficiency rose to double that of cars(~80 p-m per gal.)

Figuring out ways to reduce all trips by all means of transit is the cheapest route.

In 2004, I spent two hours on the phone with the US engineer best able (in my judgment) to answer the question of "how much" and "how fast" to electrify US railroads. John Schumann of LDK.

His estimate, for "simple" electrification (new locos NOT included) was $2 million/mile for single track and $2.5 million/mile for double track.

Going to third rail for electrifying tunnels and bridges would keep those costs down.

Switchyards can be quite expensive to electrify (step 1, use hybrid or battery or diesel switching locos).

Tracking foreign contracts to electrify puts $3 million/mile "within reason".

Please note that your link appears to use Australian $, not US $. US $ > Aus $. (old memory Aus $1 = $0.67 US $)

Best Hopes,


The Cash for Clunkers was a great program for the buyers who were able to take advantage of it and the manufacturers who were able to produce more cars. Due to its high cost, it is not feasible to maintain a program like this for very long. It probably makes more sense to have a program like Cash for Clunkers than just giving bailout money to the automakers. At least with Cash for Clunkers you are getting a tangible benefit. Another question might be is there a different program that the 3 billion could have been spent and provided better benefits. For example, three billion spent subsidizing compact fluorescent would have retun roughly 100 billion in savings.

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Are you going to tell me the dealers really subtracted 4500 from the sales price? In the 80's I thought about buying a VW from a dealership because they were promoting sales by offering 2300 off of the sales price. At the time it was substantial because the price down went from 9500 to 7200. However, the final price tag they handed me was 10,200. What they did was make up for the discount by raising all the usual fees, like dealer prep etc. to twice normal and the discount was eaten up, and then some.

So as much as those people that did those trade ins may think they got a deal, chances are the dealers made it both ways. From the customer and the govt.

This is not to impune the analysis in this article, just to remind folks what may have seemed like a deal probably was not as rosey as it might have seemed.

To emphasize your point Earl we had local car dealers running adds offering the same price reduction even if your car didn't qualify for CFC's. Well...da! Except for the very popular models when was the last time a dealer didn't come off the sticker? Great for the dealers: instead of eating the price reduction themselves they got the tax payers to cover it. I bought a KIA before the program started and the dealer had already took $5000 off the sticker before I came through the door. CFC's starts up and they raised the price back up.

Thanks for the back up Rockman. It's a numbers game those guys experts at, but I'm sure you got them down as far as they would go on the Kia. They probably enjoyed the game of having someone push them hard on the numbers.

The Cash for Clunkers program was essentially an exercise in destroying existing physical capital (the cars) in order to artificially stimulate short-term demand. (Some even say that it really didn't increase demand at all, but rather just pulled it forward from the future into the present, i.e., a person buying a new car under the program will not likely be buying a new car next year as he/she might have planned.)

To me, the Cash for Clunkers program isn't much different than giving people a rebate on a new house if they burn down their old one, or a discount on a new refrigerator if they throw their old one out. Yes, a broken window does increase GDP, but does that mean we should go around breaking each other's windows to stimulate the economy?

Nor do I buy the argument that most of the cars traded were soon going to be scrapped anyway. While no doubt some of cars were at death's door, the majority of them were still quite usable with a considerable amount of drivable miles left on them. Removing these from the road reduces the supply of very used cars, the market for which is heavily represented by low-income people. Furthermore, the requirement for the traded-in cars to be scrapped also removes used auto parts from the salvage market, thus increasing the difficulty and price of repairing old cars. Again, something that hurts low-income people.

And lastly, the fact that the percentage of domestic sales increased by a minor blip hardly changes the fact that a good chunk of the new-car sales generated by this program did not go to American car companies at all. (I can't begin tell to you how happy I feel that I as a taxpayer contributed to improving the quarterly bottom line for the likes of Toyota and Honda.)

The Cash for Clunkers program amounted to nothing more than robbing Peter to increase Paul's income, all the while pretending that something economically useful took place.

The UK scheme has resulted in the second hand value of some cars going up by 30% since it was introduced - so many cars were taken off the road.

My own car (not the sort likely to be bought under from the program) has gained $2000 in value since I bought it second hand in January.

In the US the clunker vehicle engines were disabled. The other parts of the clunker (door panels, windows) are available for reuse to repair old vehicles. Many component, especially the metals and including the disabled engine, are otherwise recycled.

@joule: I hear what you are saying in that the clunkers program had may have created the false impression of a real benefit to society. However, there appears to have been some stickiness to the efficiency gains...though time will tell if it quickly evaporates.

One could think of the clunkers program as having been an advertisement campaign for small efficient cars.

Morgan Downey -

Uh, three billion dollars is a pretty expensive advertising campaign, don't you think?

For that amount, one could probably book the ENTIRE game time of the next five Super Bowls and still have a few hundred million left over.

Please, President Obama, no more further stimulus like Cash for Clunkers ... it's killing us!

I agree that US$3 billion is a ridiculously large sum for an advertising campaign. However, it is a sunk cost about which we can do nothing to change. Now that it is done, it is worth picking through the data debris to see if there was any long term value created.

It is also worth bearing in mind that the US is a US$14 trillion economy with spending on oil of over half a trillion dollars per year. If the campaign cuts US fuel consumption by just half of one percent it would pay for itself in one year. I am not suggesting that the program has cut consumption by that amount, but just to put US$3 billion in perspective.

Furthermore, the requirement for the traded-in cars to be scrapped also removes used auto parts from the salvage market, thus increasing the difficulty and price of repairing old cars

Other than having to pour some stuff into the engines to make them unusable, I think the parts were probably removed and added to the used parts inventories.

Citizens and workers -

I must hereby proclaim that it does, in fact, shock me to see that the Oil Drum would lend any print space for the notion that infers this misguided program is a success of any kind. Were my joints not so full of ache (jail is a harsh mistress) and my mind not so numbed and pained by the idea that this assembled group of industrious global citizens must endure the extremely fallacious nature of this posting, I'd hunker over my writing desk, plume held high in withered hand, and pen an enumerated response. As it stands, I trust that others will slay this cancerous nonsense with pointed rebukes and righteous protest.

As my great-great-great grandson would say: "Cash for Clunkers a success? WTF are you smoking, Mr. Downey? The vaporized souls of future generations?"

The post does not state that the clunkers program was a success or failure.

Instead, for the benefit of taxpayers and others, the post investigates any lessons to be learned.

The data in the post shows that the clunkers program appears to have (possibly only temporarily) changed the vehicle efficiency trend of the US even after the program ended. How is that fact in particular a bad thing?

Citizen Downey -

I would urge you to consider the power of the headline. Yours has the ability to infect others with the incorrect notion that this program is something to consider as a model. When I say to you "consider" I reference only a possibility. In my beleaguered and cataract-ridden eyes, we mustn't allow so much as a whisper of chance that the U.S. administration consider replicating this ruinous program. The billions spent could have created long-lasting and immediate change. Instead, some people found themselves with new vehicles that were marginally more efficient, and then only when considered on a very superficial level of MPG and oil saved over the very near term.

When spending the monies earned from the hard labors of our working citizenry, we must urge our elected officials toward responsibility. Clearly, the C4C program can, in no way, be considered a measured, intelligent expenditure in a time where bold and immediate action must be taken. Those same billions could have been deployed far more efficiently and resulted in far greater gains. Instead, a President who has very little eco-intelligence, wasted them in a flashy campaign of pouring good (assuredly, there is room to bicker over 'good' when attached to U.S. currency) money after bad.

If efficiency is desired, is there one among us gathered here that will argue that a program that will raise the national fleet MPG average less than .1 MPG is one that should be lauded? A writer of intellect like yourself, Mr. Downey, should employ your skills toward the righteous task of exposing the bold ideas, the critical actions and flaying the false prophets.

I am with you in that I would in no way encourage the program to be repeated and that the cost was merely a wealth transfer from the future (the government borrowed the money on behalf of taxpayers).

However, the benefit I see from the clunkers program was the insight it provided into how efficiency in oil use (and consumer behavior) can be changed.

The clunkers program achieved what US$147 oil could not in changing transportation devices. More importantly, the effect appears to have stuck to a certain extent once the program ended.

What was it in the clunkers program that can be extracted for use without US$3 billion being spent? As a comment from “dohboi” above stated and I agree, I have a strong feeling that it was the characterization of inefficient vehicles as being undesirable "clunkers" was key. Emotion and popular perception rather than cold logic is huge with vehicle purchasing decisions and, as the clunker program data shows, if inefficient vehicles can be permanently presented in an undesirable light then it is effective for use in the drive toward a more efficient and secure nation.

EugeneDebbs -

I like your style! You obviously have your quill pen or tortoise shell fountain pen somehow hooked up to your keyboard.

Are you by any chance the ghost of Eugene V. Debs (though his with only one 'B'), the early 20th-Century socialist firebrand, rabble-rouser, and anti-war activist?

If so, tis a pleasure to make your acquaintance, sir.

Joule -

Indeed, I am the resurrected shade of EVD. As these times you live in very much seem to lack any 'firebrands' of quality, I've returned. While I'm through running for the Presidency, I may be able to inspire a few of the younger troops.

You've noted my unfamiliarity with this rickety keyboard device as evidenced by the detestable addition of the 'B' to my name. A mind of it's own, this clackety-clack plastic menace. I seem unable to make corrections, so DeBBs it is.


Aha, I thought so!

Alas and alack .... you've certainly got your work cut out for you here in the early part of the 21st Century.

I am afraid that you will find that, unlike those heady days of the early labor movement, there are few modern Americans willing to put their pampered arses on the line to battle the forces of greed, corruption, and tyranny.

Be forewarned, today it's an entirely different ball game than twas in 1917.

I am deeply disappointed and disturbed by what I'm reading here. Kash for Klunkers was an abysmal failure.

6th grade math is all it takes to determine just how badly this program wasted taxpayer money and made matters worse. 700,000 additional cars sold, at a cost of 3 billion, equals $4300 per car. But that 3 billion was borrowed money, and interest must be paid on that debt. At the current average rollover period of 4 years, government debt is cheap but its still a good 3% or so. That comes out to about $10000 after 30 years. (Anyone want to bet that this debt will be paid off before 30 years? Of course it wont). $10000 in public debt service, plus an additional private debt load of untold thousands, is certifiably insane. And this is using that bogus 700,000 figure. I'm only seeing a cash-for-clunkers boost of about 350,000 (SAAR 10mill to SAAR 14mill for one month = 4000000/12 = 333,000), directly attributable to the subsidy.

You have to remember that it doesn't matter how many people cash in on the subsidy. What matters is how many more new car sales did the subsidy actually create. That amount appears to be about 350,000. That doubles the total debt service to $20,000 per car, which is complete madness. You ought to be ashamed of yourself if you even entertained the thought for a minute that this sort of game playing nonsense resembles anything close to a solution to our economic problems. This country is finished if people cannot comprehend these basic principles of finance.

@Iconoclast421, whether the government should have borrowed money to carry out this program is not what the post was about. That it worsens the debt burden is obvious and the payoff for taxpayers is minimal if anything at all. This was stated in the introduction.

The point of the post was to try to show that there was something to learn from the program and it was the change in efficiency which resulted (moreso than when oil hit $147) and may have stuck after the program ended due to the successful negative characterization of inefficient vehicles.

Just the cost of going from PLPD (on the klunker), to full coverage (on the new car), is in most cases enough to offset any fuel efficiency gains. Also, the tax you pay on that subsidy is enough to buy about a year's worth of gas for many people. Also, it costs about 1000 gallons of gasoline equivalent in energy to produce a typical car. This does not include any of the energy that is spent manufacturing the systems that are used to manufacture the car or any of the car's parts. My guess is we're looking at yet another 1000~3000 gallons there. So this government program was actually a subsidy to instantly waste thousands of gallons of fuel at a cost of tens of thousands of dollars in public debt and a large but incalculable amount of private debt. Any way you slice it, it is absurd nonsense if not brazen intellectual dishonesty to think for an instant that these sort of games produce any economic benefit whatsoever.

The post is not about the financing of the program or the accounting individuals carried out personally, which I suspect, and as you state, were often not fully thought through and ended up net losing money.

The fact is that the clunkers program may have achieved a change in behaviour which is desireable to society and which persisted after the program ended. It is in all of our interest for any new vehicles purchased be as efficient as possible and anything we can learn (even if it comes from a terrible program) to achieve this end is valuable.

We have to be pragmatic about change. People are going to buy new vehicles today, tomorrow and next year. Will each of these new vehicles have embedded energy and require oil in their production? Of course. We should learn from whatever source (even from the clunkers program) how to make those buying new vehicles desire efficiency.

Citizen Downey said . . .
The fact is that the clunkers program may have achieved a change in behaviour which is desireable to society and which persisted after the program ended. [emphasis mine]

The point made by many here is that the C4C program reinforces a collective delusion, maintains or even exacerbates extant deleterious behaviors, distracts us from real change, and is therefore decidedly undesirable.

We have to be pragmatic about change. People are going to buy new vehicles today, tomorrow and next year.

Please clarify your definition of "pragmatic". Is the apocryphal lemming a victim of pragmatism? To "have to be" so, in the sense you imply, seems rather dogmatic.

Would it not be a better pragmatism to constrain not only the number of people buying new vehicles, but also to constrain the number of miles all of us drive. Is not alternate-day driving one of many responses that are far more pragmatic (in an ethical sense) than a shrug?

It would be better to let people give up on driving altogether. If they have zippy new cars they are more likely to use them. If they have old broken down inefficient ones they might choose to bike or walk to a closer store and make do with the limited choice available in that shop.

Supporting the car dependent status quo is a losing proposition.

I have a part-time job with a low part-time salary. But my commuting costs are 0 because I don`t have a car...I can bike (around 6 km every day) because many of the roads here are safe for biking...that`s because the level of car dependence here is just not being the USA and all (500 cars per 1000 people vs. USA 700 cars per 1000 people).

I have probably said this before but because I am so extremely, justifiably proud of my bicycle I`ll say it again....12 year old Miyata 3-speed, with a belt (doesn`t rust) not a chain (eventually rusts). Price when I bought it: about $500. Still perfect. Sometimes I replace a tire which will cost around $50. Commuting costs--less than $50 a year!

So none of my salary has to support a car, clunker, hybrid, or otherwise.

The sooner the US gets off of cars, the better. But the CFC program seems to encourage the status quo.

Nice! pi, you're a hero. You didn't say where "the roads here" are. Here in Seattle, I've managed 6,000 bicycle miles this year while putting only 2,000 miles on my 2001 Honda Insight. I visit the gas station once every two months or so. The tax deduction that inspired my purchase of the Insight in 2001 was a much better program than C4C (K4K?).

This country is finished if people cannot comprehend these basic principles of finance.


The average car gets driven 12000 miles per year. The trade-ins were
15 mpg using 800 gallons per year. New car average was 25 mpg using 480 gallons per year. Difference is 360 gallons.
Price of gas is $2.5 per gallon or $900 per year saved.

Average car last 15 years.
The uniform present value factor at 3% discount for 15 years is 11.94. 11.94 x $900 = $10746.

Unfortunately, the government is hurting itself by encouraging
efficient cars as it would be losing the 53 cents per gallon($190 per year) going to the Highway Trust Fund or an additional $2145 over the 15 year lifespan.

The consumer would save ~$10746 but the government would pay $6646 total assuming a $4500 payout.

The government uses a 1.5 multiplier (effect) so they would expect
about $16119 to result from a $10746 investment. If the tax rate is
28% so that's $4513 back to the government per car.

The loser would be the Highway Trust Fund.

I dont know where you got 360 from, but since its an insignificant difference I will ignore it. You cant forget that new cars are driven 25% more than older cars. So we're really talking about going from 800 galons a year to 600, in your example. 200 gallons a years saves only $500, with the first 5 years being spent making up the energy cost of building the car. (And arguably the next 5 years as well.)

Your $16119 figure is completely fictitious, like a number a Wells Fargo model would produce in defense of selling an OptionARM to a waitress in California. Even if you started with the right input values it would be more like $8000. That doesnt even come close to covering the public debt service, or the private debt service.

Yeah, 800 - 480 = 320 gallons, not 360 gallons.
I have no idea where you got the idea that new cars are driven 25% more than old cars. If true a new car will go 16000 miles at 25 mpg
or use 640 gallons instead 12000 at 15 mpg or 800 gallons so you think 160 gallons would be saved instead of 320 gallons.

By your logic, a new car is new for only one year so over 15 years you would be 640 + 320 *14 (5120 gallons) versus 800*15 (12000 gallons) over the life time instead of 4800 gallons.
Using the uniform present value at 3% you get 11.94 + .97 =12.91.
$2.5 x 320 x 12.91 =$10352.

According to financial bloggers, Obama uses a 1.5 multiplier.

1.5 x $10352 = $15528. 28% of $15528 = $4347 instead of $4513.

US debt is secured with treasury bonds that don't pay interest and principle until 20 or 30 years in the future.
If inflation happens
the national debt will be reduced, but people rightly fear inflation more than the national debt.

US debt is secured with treasury bonds that don't pay interest and principle until 20 or 30 years in the future.

Towards the end of the Clinton Administration, the US Treasury stopped selling anything longer than 10 years because of the risk of paying off the national debt. They did not want to pay off ALL debt in public hands except some 30 year bonds with a dozen years left till maturity. They then would have to buy them on the open market (likely at a premium) and/or just wait for them to mature.

GWB and the Republicans *DID* protect us from one risk, the risk of paying off the national debt. So they started selling long maturity debt again.

All US Treasuries pay interest every year (some 3rd parties have split the coupons from the principal and sold them separately, creating zero interest Treasuries that pay a lump sum at maturity).

A vast majority of US Treasury debt# rolls over (matures and new ones sold to pay off the old ones) every couple of years.

# This does not include the special US Treasuries held by Social Security, the Highway Trust Fund, etc.)


I have no idea where you got the idea that new cars are driven 25% more than old cars.

This is correct - the data is from the US DOT and HWTA. New cars get the most mileage, and mileage decreases gradually with age.

The US has been spending roughly an average of $100 billion per year for military expenditures in the middle east since the first Gulf war. I doubt we would spend more than ten bucks to "stop oppression" there if all they had was sand (think Dafur, Rwanda).

The US gets roughly 800 million barrels per year from the Gulf. Do the math - each barrel is costing us $125 in military expenditures.

At 39 gallons of product per barrel, it's about $3.20 per gallon.

Of course, that doesn't apply to the barrels we get from Mexico or Canada, but on the margin it's probably the figure we should look at. And that marginal military cost is likely to go higher when we talk about getting oil out of the 'stans under China's nose.

And what's the debt service on that $100 billion?

Seems like CFC was a bargain to me - and I hadn't even thought about the effect of negative association of "behemoths" with "clunkers".

Too bad it doesnt work that way. It may seem like we are only spending $100 billion a year to play our games in the middle east. But when you look at the rest of the military budget (currently 75%+ of US individual income tax receipts), you cannot justify it without the games being played in Iraq and Afghanistan. So the cost is actually much higher. Say, 300 billion a year just for Iraq. And then you have to compensate for the decreased supply caused by our games in Iraq. We pay more for oil because our games in Iraq pulled at least 3% of global supply from the market.

But we really cant look at the military like this. The military budget is a service charge we pay to hold the world reserve currency. If we did not spend the money there would be nothing to back the dollar. It would be worthless. But you shouldnt complain since it is the poor countries of the world who actually pay. We just print the money, and the US is first to benefit from that new money before it circulates around the world, devaluing everyone's dollar holdings.

:) what s/he said

Have you factored in the potential reduction in oil imports due to the improvement in fuel efficiency? Assuming drivers do not increase traveling, more money will stay in the U.S. The U.S. needs to get its crude oil consumption down to about 5 Mb/d currently to eliminate our dependence on foreign supplies. Cash for Clunkers was a step toward localization.

Efficiency does not reduce consumption. Jevons paradox. CFC cannot and will not reduce oil imports.

As I've said before, the gasoline energy equivalent requirement to build a typical car is 1000 gallons. The CFC trade-in results in a net savings of 200 gallons a year, not counting insurance and finance charges (yes the insurance and finance industries do consume considerable amounts of energy). So the first 5 years of the car's life will be spent paying down just the energy cost to build the car. But that completely ignores the energy costs to build all the infrastructure required in order to build a car. We dont know how to quantify that, but it certainly is a real number, and real energy is used, and thus it cant be ignored. That number could easily be 2000 gallons, in which case the fuel efficiency savings will never make up for the cost of producing the replacement vehicle. What if it was 5000 gallons?

the gasoline energy equivalent requirement to build a typical car is 1000 gallons.

Where did that number come from? And how much is actually liquid fuel??

Efficiency does not reduce consumption. Jevons paradox. CFC cannot and will not reduce oil imports.

I dispute this assertion, because the marginal increase in efficiency was not the only effect of C4C.  Lots of people paid money or took on debt payments also.  This is money which cannot be spent on fuel.  In addition, you are quite wrong on the particulars; per the CMU study cited by ILEA, fuel and the fuel cycle is about 85% of the total.  Even if manufacturing energy was doubled to cut fuel consumption in half, the net savings would still be 32% in overall energy and close to 50% in petroleum.  (Incidentally, the 119755 MJ for manufacture is equivalent to 987 gallons at 115000 BTU/gallon; the gross is close, but only a small part of it is petroleum.)

I also dispute the assertion in general, because it doesn't apply when hedonic effects and Leibig's Law of the Minimum are concerned.  When I replaced all of my incandescents with fluorescents, I did not start leaving 4 times as many lights on to compensate; my electric consumption dropped by about a third, because I had achieved my desired hedonic effect.  If one could get a super-insulated refrigerator which uses 1/10 the electricity of current models, who would "compensate" by buying 9 more refrigerators?  If my car should double its fuel economy overnight, I would not drive twice as much; I only have a certain amount of time for driving, which limits me even if each mile was free to me.  There are also overall limits to driving, such as traffic congestion.

Efficiency has a very real role to play, and dogmatic denials sound like excuses for wasteful personal lifestyles.

(and while I'm here, I agree 100% with OldFarmerMac:  C4C was a backdoor auto-company bailout and almost nothing else.)

That's good language about Jevon's/efficiency - I'll steal it, if you don't mind.

C4C was a backdoor auto-company bailout and almost nothing else

You make that sound like a bad thing. :]

It is.  We could have gotten so much more out of it, both directly and through effects on public consciousness.

hmm. What did you have in mind?

Criticism of CFC seems a bit "hindsight is 20/20" ish. While it's always good to identify where something could be improved, it seems we should acknowledge that

1) it did what it was intended to do - primarily to stimulate auto sales and the economy, amd secondarily to improve efficiency,

2) it was an improvement over the European programs from which the US got the idea (they had no efficiency provisions), and

3) CFC got intense criticism during the drafting process for the efficiency provisions, as many people thought they would limit the program too much.

Sure, it was expensive: that's the point of stimulus programs, to put money into the economy.

Efficiency regulations are cheap for the government, and great in theory, but the difficulty is that you're creating costs for those who are regulated, so that they'll fight the regulations tooth and nail. We have to acknowledge the costs in delay created by a parsimonious approach. We may need to compensate people for their costs in order to get things moving.

I wrote some more thoughts on this:

I was criticizing C4C (CFC is "chlorofluorocarbon") before it opened, so no hindsight charges will fly here.

The avowed purpose of C4C was to remove inefficient vehicles from the road.  Replacing them with vehicles which are only marginally more efficient defeats that purpose, so the program should have required greater economy improvements to reap the incentives.  Perhaps a bottom tier of incentives, like a $1500 level, would have been appropriate for the marginal increases.

Also, the existence of an unsold inventory of large vehicles isn't necessarily a problem.  They aren't hurting anything if they aren't being driven, so the optimal solution is to let them sit on the lots!  Ending manufacture of new ones will let the inventory be drawn down at natural rates.  The best possible outcome from C4C would have been to shift production towards a much more efficient fleet and get public demand shifted similar to the aftermath of the 1979 oil price shock.  Accelerating sales of marginally more efficient vehicles this year just pulled demand forward, stealing sales which could (and arguably should) have gone to the much more efficient fleet Detroit needs to start building.

If world oil exports are falling at even 5%/year, keeping up with that requires a 36% increase in fuel economy over the 6-year half-life of the vehicle fleet.  C4C beat that, but not by a whole lot and only by accident.  That 36% should have been the floor.  C4C regulated no one; all it did was offer incentives to people who met the requirements.  All I'm saying is that the requirements should have been higher; after all, shouldn't the taxpayers get something worthwhile for their money?

I basically agree with you, though I'd quibble with you about the purpose of the legislation: it was primarily a stimulus program, which was improved by the addition of energy efficiency as a secondary goal.

The problem here is that the political context in which such legislation is crafted doesn't contain the PO/CC awareness needed to support more aggressive action. CAFE requirements should be much higher; we should have stiff carbon/fuel taxes; we should be doing many other things such as cap and trade in addition to regulatory efficiency improvements such as CAFE and carbon taxes (not to mention building efficiency).

Of course, we have most of the information we need to take action. Much of the reason for delay is resistance in the form of disinformation ("FUD") from those who would lose careers and investments. That's one good feature of "C4C": it overcomes such resistance by paying people to give up their inefficient capital investments (rather than just making them obsolete by regulation).

Finally, we learn by doing and trial & error. There was much speculation that the efficiency requirements were too stiff, and that as a result the program would fail for lack of participation. Instead, there was so much demand that they expanded the program substantially.

Was CfC a cost effective energy conservation measure? At 10k/mi/yr each new car saves 230 gallons of fuel/yr. Over a 20 yr lifetime per car that means 4600 fewer gallons burned for $4500 invested or roughly 98c/gal.

Thomas-The cars traded in did not have twenty years of lifetime left-and as cars ge older they are driven a lot less as a rule.I didn't save the link but a few days ago somebody here put on e up that said fifty percent of all vehicle miles are put on cars less than six years old, although the average car is much older.

It's too soon to cite a halo effect - maybe the CARS programme preferentially attracted owners of SUVs (for which the benefits of participation were greater) and the people left buying cars the next month would have bought cars anyay.

As a UK driver I don't understand why US drivers seem to prefer such inefficient cars - my diesel Civic isn't tiny, isn't slow, and does 55mpg. OK the apparent advantage of diesel is part con because diesel is more energy dense than petrol but even so you could get a petrol car that did 40mpg without sacrificing comfort and performance.

Having said that, improving efficiency isn't the long term answer to transport oil use. The long term answer is to discourage people from working so far from home, to discourage unnecessary haulage, to invest in infrastructure for electric cars, to physically separate bike lanes from car lanes and to make public transport attractive to use.

My conspicious mind remembers this differently.

China had started a buying spree with credit in their country. The only reason america stepped on the economy brake was because fuel shortages popped up all over the place in 2007. If China continued it's course those fuelshortages would start reapearing again. US warned them and made a statement. And it looks like china complied.

What a pleasant, intellectual discussion!! Reminds me of the Titanic story about the guys having a drink, playing cards or some sort of meaningless activity while the ship sank. As trillions of taxpayer dollars slide into oblivion, we discuss gas mileage, calculate meaningless numbers filled with conjecture and other pleasant comments. Must be nice to be so disconnected from the real world. Reminds me of the pot parties of old when we spent hours discussing whatever filled our drugged minds at the time.

It is precisely decisions which impact gas mileage, oil use and resources which are cold hard reality and far from meaningless to discuss and act on. The trillions of dollars are the illusion.

Gail: Data is the plural of datum. The data show not the data shows.

dougphd -

As I'm sure you are aware, word meaning and usage are constantly changing.

With regard to 'data' being singular or plural, from a purely literal standpoint you are of course correct. However, these days the word data is commonly used to connote a set of information made up of multiple information subunits. So, just as one would say "this collection of information IS of high quality", one can legitimately say "this data IS of high quality". Further reinforcing this point is the fact that the singular form, 'datum', as used to indicate a single piece of information, is rarely used for anything these days. Honestly now, how many scientists do you know would actually say, "we discovered we had a bad DATUM and so did not include it in our graph"?

So, apart from the pedantic style of formal scientific papers, treating the word data as a plural is gradually fading away. This is why I deliberately use data as a singular word (particularly when referring to a specific set or collection of information) even though I know it is technically incorrect.

We are seeing the same thing with regard to the distinction between 'who' and 'whom' in common speech. In casual speech, the use of 'whom' sometimes has a rather stuffy feel to it. This is not necessarily a corruption of good English, as there was a time when the word 'ain't' was considered perfectly good English.

If it takes 40 barrels of oil to make a car, and if the clunker got 15MPG, and the new car 25MPG, it takes 17,640 miles to break even on oil consumption alone. By that time, oil will likely be back to $150 a barrel, and we start the true consumption destructive cycle once again. Force the lower 20% of US society into serfdom to decrease overall consumption seems the American way at this point. I agree that gas prices mean very little to us top wage earning US professionals, but we do like our condo values going up, thus the credit system must stay intact, or at least appear to, for several years, until we make other plans.

In terms of wealth distribution, the US has been a banana republic for decades. I suspect peak oil will make this more obvious.

The assumptions underlying this article are all wrong. Anything that makes driving cheaper encourages more driving. Increasing the average fuel economy of the U.S. automobile fleet, while not simultaneously increasing the gasoline tax or creating a per-mile tax, will only encourage more driving, farther-out suburban subdivisions and greater automobile dependency.

We need to make driving more expensive, not less, so as to encourage public transportation use, walkable urban development, walking and cycling.

Late to the party on this thread but there is one blaring error in the logic.

Cash for clunkers by design pulled a lot of demand forward most of the buyers where probably within a year or two of buying a car anyway certainly many would have bought within the next five years. So the savings if any is trivial and at best a few years of difference in gasoline usage for the clunker vs a new car. Next of course assuming that oil prices continue to increase one can expect car makers to sell more fuel efficient cars or even EV's. Obviously the buyers in the cash for clunkers program did not all by hybrids nor did they buy particularly fuel efficient cars. They bought what they liked.

Next if they had kept their clunker and fuel prices increased dramatically many would have probably opted to reduce their fuel usage and would have sought alternatives. Simple carpooling is a tremendous saver. With the nominal fuel savings and the fact they are paying all the other costs if they drive the car or not esp the car payment many will opt to drive to at least enjoy their expensive new car.

Not only do I not see any savings the overall situation was probably detrimental. And of course later on more people like me who did not buy into cash for clunkers for the reasons I outlined will not buy until a much better deal is offered.

Obviously the next time the automakers are on their knees a new program will come out and if it does not then whatever automaker is bankrupted will be forced to liquidate. And of course a good precentage of the people that traded in their paid off clunker are going to lose their jobs so a abnormal number of late model cars will be available either in the used car market or via repos.

Either way cheap late model cars are going to be abundant.

As for homes I see no intrinsic reason for car price not to plummet. And whats really funny is this article completely neglected to include any estimate of the number of people who would lose their jobs as gasoline approached 20 a gallon. Almost everyone in that group with a car payment would lose their car.

In general today taking on debt for any reason is dangerous and can blow up esp debt on something critical to having a job aka a car. The price of gasoline is irrelevant if you lose your job and lose your car and can no longer find decent work without transportation.

And given the unemployment rate employers have no reason to even deal with someone without a car. Take the bus and its late one day your fired.

I'd not be surprised to see many of the people who bought into cash for clunkers eventually ending up with a much older car with worse mileage as they struggle after losing their job.

Sorry, no link, but I saw somewhere that a pretty heavy percentage of clunkers traders had missed their very first payment.

This was nothing more than a subsidy for the automakers, combined with an attempt to get citizens to borrow money again (consumer credit is declining at alarming speeds).

If it was about fuel economy, it would have had different restrictions. Increase mileage by a set percentage, not an arbitrary figure. It also would have been valid (at least at partial value) on motorcycles and scooters. It would have been good for late-model used cars. And the legal requirements would have been "registered for 90days, nevermind insurance" or something, not "registered and insured, under the same owner, for a full year". Plus it would be an ongoing program.

It was nothing more than an attempt to clear some last-years inventory and create another tiny credit bubble. Oh, and destroy a lot of decent used cars. Your $2500 junkpile could have been a nice upgrade to someone in a $800 truck.

BTW, Citizen Downey, thank you for your excellent "Oil 101". I hope you spend wisely (by buying local) your cut from my book purchase.

I will gladly purchase a few Brooklyn Beers (favorites of mine are their rare 'Black Ops', 'Local 1' and 'Local 2') or alternative local beverage for anyone that visits New York City with a copy the book or if you are a TOD commenter/poster. Email the web site.

I'm baffled by a lot of the comments here which criticize the CFC program for wasteful spending. It was a stimulus program - intended to increase vehicle sales and consumer spending.

It's not important that the money came from borrowing - that's the point of stimulus: to borrow money that's being saved and not spent, and get it into the economy.

It's not that important if it pulled sales forward - the point was to help to clip off the bottom of the curve of the business cycle, and accelerate the recovery.

I agree that the European "breaking windows to sell windows" programs weren't a great idea. The surprising thing here is that in the US some environmentalists added an old clunker/gas-hog-buying & crushing idea and came up with something that actually made some sense.

Sure enough,Nick-The old drunk economy's hands are shaking but if we pour him another drink or two he'll steady up -a little- for a few minutes.

"Stimulus" is just another word for corporate handout in this case.

We could have had ten times the bang for the buck doing someting useful with the money, and gotten the energy savings right quick by slapping a graduated guzzler tax on the larger vehicles.

For those not in the know-nearly all the three quarter ton four by four trucks sold over the last few years were bought by business owners who were allowed to write them off on a superfast schedule -another "stimulus" for Detriot at every one else's expense.

At least they hit the targeted audience and vehicle squarely that time- the Japanese don't yet sell such trucks here.

The old drunk economy's

Well, are you familiar with the concept of gov borrowing of excess private savings during recessions?

"Stimulus" is just another word for corporate handout in this case.

Are you familiar with the idea that the Great Depression could have been averted by bank bailouts?

We could have had ten times the bang for the buck doing someting useful with the money

Like what?

gotten the energy savings right quick by slapping a graduated guzzler tax

Of course. But, the primary purpose here was to stimulate sales, and it did that. The energy savings was a sensible addition, which meant that the destroyed capital equipment was the least energy-efficient.

nearly all the three quarter ton four by four trucks sold over the last few years were bought by business owners

Yeah, that was pretty annoying.

Okay... think about this for a second. Have any of you any idea the resources that go into construction of new vehicles? The most wasteful thing you can possibly do is buy a brand new car! If you want to buy a more efficient vehicle, fine... go find some old Honda or Toyota that has already been manufactured and drive that. Really, this is ridiculous. All they did with CFC is trade in vehicles that already exist for resource-intensive new ones and paid-off cars for debt. Way to go.