Two University of Delaware economists

By examining the top-line results, Cash for Clunkers has to be ruled a success. The program resulted in almost 700,000 dealer transactions, and fuel efficiency of traded in vehicles was 15.9 mpg while the fuel efficiency of the purchased vehicles was 24.9 mpg. But Cash for Clunkers is a great example of the law of unintended consequences as there were secondary impacts that need to be considered before the program can be ruled a success: According to a study by, only 125,000 of the 690,000 purchases would not have been made without the incentives, or in other words, over 80% of the purchases would have occurred even if Cash for Clunkers had not provided the $3,500 and $4,500 vouchers. Two University of Delaware economists determined that the program had a net cost of $2,000 per vehicle transaction and total costs outweighed benefits by $1.4 billion. By forcing all traded-in vehicles to be destroyed the supply of inexpensive vehicles available to lower and middle class households was greatly reduced. This reduced supply in turn caused an increase in price for similar vehicles available for sale, thus forcing households to spend more for used cars. Cash For Cars Sydney

On July 1st, 2009, the Car Allowance Rebate System (CARS) or Cash for Clunkers officially began. The purpose of the program was twofold: to help stimulate the economy, while also reducing the number of vehicles on the road with low fuel efficiency ratings. The program ended on August 24th, 2009 when the $3 billion appropriated to it was completely exhausted.Consumers were given a voucher for $3,500 or $4,500 for trading in an old vehicle to put towards the purchase of a new car or truck. If the new vehicle had a combined fuel economy that was at least 4, but less than 10 miles per gallon (mpg) higher than the traded-in vehicle, the credit was $3,500. If the new vehicle had a combined fuel economy value that was 10+ mpg greater than the traded-in vehicle. the credit was $4,500.

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