The Cash for Clunkers Plan discount was kicked off in the U.S. with a $1 billion allocation which, by paying up to $4,500 per vehicle in new car discounts has taken approximately 250,000 older vehicles off the road. The engines from these vehicles are being destroyed so they will never pollute again. Another $2 billion has been applied recently to recharge the program. The results worldwide are even more impressive; with Germany topping the toll so far with 1.2 million cars swapped out since spring. A 1985 Dodge Diplomat was a premium model at the time, with an average fuel efficiency of 16 mpg. Replace that with another American classic, the 2010 Chevrolet Malibu Hybrid to qualify for the Cash for Clunkers discount.
One goal of Cash for Clunkers is to give the auto industry a boost by making it more affordable to buy a new car. So far, these results have been realized, with auto manufacturers such as Ford boosting production to keep up with the current increase in new car sales. The effects of increased car sales extend beyond auto manufacturers including real estate, finance, insurance and elsewhere.
Another area where the Cash for Clunkers program is having a positive effect is in highway safety. With so many of the targeted vehicles lacking airbags, anti-lock brakes and other life-saving features, Cash for Clunkers is getting some pretty dangerous vehicles off the road and saving lives in the process. Six out of the top ten trade-ins which qualify for the Cash for Clunkers discount are Ford Explorers.
While auto manufacturers and new car buyers have profited from the program, taking so many drivable, albeit fuel-inefficient cars off the road has had a trickle-down effect on the numbers of lower-priced used cars available for used-car lots. People with limited resources are now scrambling to find cars they can afford. So, while the CARS program has aided people who probably would not buy a new car without it, Cash for Clunkers has done so to the detriment of people who are already struggling to own a car.
Cash for Clunkers Green Benefits
Trading one of these “clunkers” in on a new vehicle which gets at least 25 miles per gallon was predicted to save 65 million gallons of gasoline if the same amount of miles is driven by new car owners. The calculations done in an article in Businessweek concluded that this savings in fuel represents only a minuscule amount (0.04 percent) of the total gasoline consumption of the U.S.
If everyone in the U.S. drove at the speed limit and no higher, the fuel savings by doing just that would total ten times the amount of Cash for Clunkers green benefits every year.
The target population of vehicles manufactured in 1985 or later average 16 miles per gallon or less will be replaced by new ones which get 25 mpg or better. The Clunkers for Cash green house gas decrease produced by driving vehicles which use less gasoline compares with the carbon footprint of manufacturing a new car. The electricity required for manufacturing and transportation of new cars produces an average of 7.5 tons of carbon dioxide emissions per car. The 16 mpg clunker can run for a full year before emitting that amount of carbon dioxide. With an estimated 254 million vehicles registered in the U.S, the benefit of 250,000 new car replacing clunkers is nearly infinitesimal.
Before a new car dealer or financing bank will approve a new car loan, the borrower will have to purchase a comprehensive car insurance policy to cover the lender’s collateral. Your new car expenses will include a much higher car insurance rate than on your ten or fifteen year old car. Before your new car dealer will qualify you for a Cash for Clunkers discount, you must show proof that your trade-in has been covered by a car insurance policy for at least one year. Such a provision will prevent people from collecting a discount on a car they just resurrected from the bone yard.
UC Berkeley scholar Lee Schipper studies fuel economy issues and concludes that even with another $2 billion added to the Cash for Clunkers program, the environmental impact will be microscopic compared with the possible outcome of using those funds for renewable energy products. Projects which depend on loans from the Department of Energy may never even get started if funds are funneled toward buying new cars. The program may have a small stimulus effect on the economy but will not reduce our need for foreign oil.
The Cars for Clunkers plan will probably be epitomized as a mixed blessing which took hundreds of thousands of gas-guzzlers off the road in the U.S. and millions worldwide and boosted a faltering auto industry. How that money could have been better used will be a subject for debate for years.