Nine Months Later, Cash for Clunkers Remains Controversial

Cash for Clunkers
Cash for Clunkers

About nine months have passed since the federal government ended its popular and controversial "cash for clunkers" program. But the jury is still out on how much the incentive helped boost the economy or put more fuel efficient vehicles on the road, according to a report the Government Accountability Office released Thursday.

Titled "Lessons Learned from Cash for Clunkers Program," the report says that 680,000 vehicles were sold or leased during the month-long program which offered consumers a credit of up to $4,500 to trade in older, gas-guzzling vehicles for new, more fuel efficient ones. "Yet some of these sales would have happened anyway," the report says.

The National Highway Traffic Safety Administration estimates that the short-lived program, also known as CARS, was responsible for 88% of the 677,842 vehicles sold, and also found that new vehicles purchased or leased under the program had an average combined fuel economy of 24.9 miles per gallon, compared with 15.7 mpg for those cars and trucks traded in, according to the GAO report.

Democrats Call Program a Success

Democratic lawmakers hailed the GAO's findings as proof that the Obama administration program accomplished what it set out to do.

"Cash for Clunkers was a win-win that resulted in cleaner cars on the road and an increase in sales for the struggling auto industry," Rep. Bart Stupak, D-Mich., said in a written statement. "The positive feedback I received about the cash for clunkers program from consumers, car dealers, auto parts suppliers and auto manufacturers across Michigan was further confirmed by this GAO report."

The report confirms "the program was a huge success," says George Magliano, director of automotive industry research at IHS Global Insight. "It cleaned out the inventories; it got the market moving again."

Questionable Numbers

The report wasn't completely congratulatory, however. For one thing, it questioned the NHTSA's methods for counting the vehicle sales that resulted from the CARS program. Given insufficient time to establish and administer the program, NHTSA "did not follow some generally accepted survey design and implementation practices," possibly making the survey data unreliable, the report says.

Other industry organizations, such as car-buying website, have attributed just 125,000 sales to the program, while Maritz Automotive Research Group, estimated that some 542,000 vehicles were sold under the incentive.

The report concludes that consumers, car dealers and manufacturers all benefited from cash for clunkers, while scrap yards and salvage businesses reported mixed results. And while dealers and automakers saw increased sales from the incentive, they did encounter some administrative challenges in processing the claims on behalf of consumers, according to the report.

Critics May Not Be Convinced

Republicans harshly criticized the program during its brief run last July and August. Shortly after its implementation, Sen. John McCain of Arizona threatened a filibuster to thwart Senate approval of an additional $2 billion in new financing for the program, which had quickly run through its initial $1 billion funding. (The money came out of a clean-energy loan-guarantee program, raising the ire of some greentech supporters, as well.)

Sen. Jim DeMint, R-S.C., said at the time that the program was representative of the "stupidity coming out of Washington right now." Neither Senator returned calls Thursday seeking comment about the GAO's findings.