Clunkers program: Only 125k in addional sales, cost $24k per vehicle

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

Clunkers: Taxpayers paid $24,000 per car

Auto sales analysts at Edmunds.com say the pricey program resulted in
relatively few additional car sales.

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.
Is the economy really getting better?

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."
0:00 /4:57Why I fired GM's CEO

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.