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Cash for clunkers financial -analysis- You decide
Not sure if there is any flaw in this calculation but this came across my desk today.
A vehicle driven 24,000 miles per year at 15mpg uses 1600 gallons of gas. A vehicle driven 24,000 miles per year at 25mpg uses 960 gallons of gas. So, the average clunker transaction will reduce US gas consumption by 640 gallons per year. They claim that 700,000 vehicles sold through the program, so that's 448 million gallons per year. That equates to a bit over 10 million barrels of oil. 10 million barrels of oil is about one-half of one day's US consumption. 10 million barrels of oil costs about $750 million at $75/bbl. So, we as taxpayers contributed $3 billion to save $750 million. How good a deal was that? At least they'll probably do a great job with health care, though! Of course you need to look beyond just the gas savings topic, take into consideration the profits made in the auto industry by this subsidized project as well. |
The average new car (according to the CAFE mandates) gets more than 15 mpg, and you failed to factor in the financial gains enjoyed by the dealers, their employees, the car makers and the overall economy.
But it was still a bad deal. |
& you left out the additional debt that the auto loans create for the buyers, to say nothing about the depreciation in the first few years of the new car. If they had made the thing about increasing mileage & you could use the clunker program to buy either a used or new car, the benefits would have been as good and the business benefits would have been more locally concentrated.
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And now there is suspicion that many of the "clunkers" did not get crushed, but were moved across state lines and retitled as recovered salvage cars. [evidently some states allow this]. So the dealer takes in a gas guzzling late model clunker for NO TRADE in amount except the $4500 from the Gov. Re-titles it as SALVAGE. Then trucks it across a state or 2 and re titles it. He now has a SELLABLE car that paid him $4500. of our money, minus whatever his transportation and title costs were. He ought to be able to wheel and deal on that baby!
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