Clunkers: Taxpayers paid $24,000 per car

http://money.cnn.com/2009/10/28/autos/clunkers_analysis/index.htm

NEW YORK (CNNMoney.com) -- A total of 690,000 new vehicles were sold
under the Cash for Clunkers program last summer, but only 125,000 of
those were vehicles that would not have been sold anyway, according to
an analysis released Wednesday by the automotive Web site Edmunds.com.

Still, auto sales contributed heavily to the economy's expansion in
the third quarter, adding 1.7 percentage points to the nation's gross
domestic product growth.
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The Cash for Clunkers program gave car buyers rebates of up to $4,500
if they traded in less fuel-efficient vehicles for new vehicles that
met certain fuel economy requirements. A total of $3 billion was
allotted for those rebates.

The average rebate was $4,000. But the overwhelming majority of sales
would have taken place anyway at some time in the last half of 2009,
according to Edmunds.com. That means the government ended up spending
about $24,000 each for those 125,000 additional vehicle sales.

"It is unfortunate that Edmunds.com has had nothing but negative
things to say about a wildly successful program that sold nearly
250,000 cars in its first four days alone," said Bill Adams, spokesman
for the Department of Transportation. "There can be no doubt that CARS
drummed up more business for car dealers at a time when they needed
help the most."

In order to determine whether these sales would have happened anyway,
Edmunds.com analysts looked at sales of luxury cars and other vehicles
not included under the Clunkers program.

Using traditional relationships between sales volumes of those
vehicles and the types of vehicles sold under Cash for Clunkers,
Edmunds.com projected what sales would normally have been during the
Cash for Clunkers period and in the weeks after.

Edmunds.com's estimate of the ultimate sales increase generally
matches what industry experts had thought, said George Pipas, a sales
analyst with Ford Motor Co (F, Fortune 500). But that misses the
point, he said.

"The whole purpose of the program was to provide some kind of catalyst
to kick-start the economy," he said, "and by all accounts the extra
production that was added this year was a boost to the economy."
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Ford was one of the biggest proponents of the Cash for Clunkers
program and several Ford models were among the top sellers under the
program.

While auto sales in September were hurt because auto dealership
inventories were drained of products by the program, sales this month
are already back on track or better, Pipas said. "I think the October
sales results will show Clunkers is behind us and there's no more
payback or inventories issues."

Emunds.com's projection indicates that, without Cash for Clunkers,
October's sales increase would be even higher. To top of page