CAR Research Memorandum: The Economic and Fiscal Contributions of the “Cash for Clunkers” Program – National and State Effects

Full Description:

The Consumer Assistance to Recycle and Save (C.A.R.S.) Program, commonly called “Cash for Clunkers” (C4C), was a $3 billion government incentive to boost automotive industry sales that was in place July 24, 2009 through August 24, 2009. The program was widely hailed as a success since 677,081 individuals traded in their older and less fuel efficient vehicles for new vehicles. During this 32-day period, 2009 new vehicle sales peaked and, for the first time in a long time, the industry experienced the first signs of recovery. Aside from the potential environmental benefits associated with the program, the major purpose was to create jobs in the devastated automotive sector of the U.S. economy.

The Center for Automotive Research (CAR) estimated net new vehicle sales and employment induced by the C4C Program using a combination of an econometric sales forecast model and an inter-industry multi-region simulation model. In total, CAR estimates:

395,000 units new vehicle sales,
40,200 full-time equivalent jobs in the United States,
$2.085 billion increase in gross personal income, and
$1.275 billion net revenue

Overall, motor vehicle output added 1.45 percentage points to the third-quarter 2.2 percent change in real Gross Domestic Product (GDP).

This research memorandum was sponsored by the Center for Automotive Research and was not commissioned by any third party organization or company. The C4C Program succeeded in improving fuel economy of new vehicles sold, and in providing much needed stimulus to the struggling U.S. automotive industry.