Just a reminder: Cash for Clunkers requires destroying perfectly usable cars

Has anyone gone through the numbers on this program to see if it’s even possible to burn through one billion bucks? I started shooting through the numbers to night, did some research, and shot it over to AP and Ed in the tips line. But I thought I’d pitch it here to see if you guys agreed with my numbers. I figure it’s safe since it’s 11:20 my time and most people are in bed, and I’m battling a mild case of insomnia. Anyway, here goes.
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If you take $1,000,000,000/$4,500 you get 222,222 transactions. Remember, the $4,500 is the MOST amount allowed, so that means AT LEAST 222,222 transactions need to take place in order for the money to run out. They said the program ran out in the first week, so 222,222/7 = 31,746.03 transactions per day. Then take 31,746/9 for an eight hour day, plus one hour over time, and you get 3,527 transactions per hour throughout the US. I couldn’t find out how many new car dealerships there are in the U.S. without paying money for various business reports, so I couldn’t determine how many units had to be sold per dealership on average in order maintain the transaction per hour number. So we’ll skip it. Now here is where it gets interesting. According to this WSJ article, the total car and truck sales in the U.S. for the month of June 2009 was 859,847 over a selling period of 25 days (scroll down to the bottom of the page to see this figure; it includes cars and trucks both import and domestic). That means if you take the total number of sales and divide it by the days (859,847/25) you get 34,393 units per day in the month of June on average. Thus if you take the number of transactions per day that we derived above (31,746) and compare it to the total number of cars sold in June this year per day on average (34,393) you’ll realize that, if July is similar to June in terms of sales amounts, then nearly every single automobile transaction for the seven days the CFC program was active, had to have been a part of the program. I find that to be quite astonishing, almost impossible. It means that everyone who went out to buy a car in those seven days, also had a car that they were willing to completely ditch, which makes little sense since most of the time the kinds of “clunkers” being traded in for $4,500 would fetch far more than that as a trade-in. For example I traded in my 2001 Sonata in 06 for a little over $4,000, and I beat that thing into the ground…lots o’miles on that little Korean mover! So there you go. Is it possible that for the seven days the CFC program was up and running, every customer took part? Yes. Is it likely, not even remotely. In fact it becomes far more unlikely when you realize that my number is based on the highest amount offered by the program ($4,500). It also includes the auto sales numbers for makers such as Porsche, Audi, BMW, Mercedes, etc. And I doubt people are trading in their clunkers for Boxters! In other words, these considerations would reduced the per day sales number in the month of June on average. Which means that more people bought cars under the CFC program than normally buy cars on average in a typical day! Can there be that many people who have cars laying around that are worth less on trade-in than $4,500? B.S. Thoughts?

Weight of Glory on August 2, 2009 at 12:34 AM

I forgot something. Included in the 859,847 total car and truck sales figures for June 09 from the WSJ article, are sales to corporations, municipalities, city/state governments, police, etc. I doubt these entities would partake in the program, so you can remove them from the equation. This means that what I’m supposed to believe is that the percentage of cars sold under this program is greater than the number of cars sold on average per day period! So for this past week, every car sold…every car… was sold under this program.

Weight of Glory on August 2, 2009 at 12:54 AM

AZfederalist on August 2, 2009 at 12:57 AM

You’re right. I didn’t consider all the other expenditures just to run the program. But does that make it plausible? In other words, what, in your opinion would be a reasonable expectation for customer participation in the program, out of total sales figures? 50%? 60%? Also, if you can burn through it in a week, then how does Congress expect the additional 2 bill to last until Oct or Nov, or whenever it ends? Thanks for the input. It’s good to know there are other HA addicts out there!

Weight of Glory on August 2, 2009 at 1:08 AM

There was a run on all sorts of vehicles, dealers weren’t dealing price — until the program was suddenly canceled with thousands of vehicles on order and not delivered. I don’t remember who wound up the overall losers in this boondoggle, but it certainly hit taxpayers heavily.

AZfederalist on August 2, 2009 at 1:20 AM

Ugh. That’s crappy. I hate central planning.

Weight of Glory on August 2, 2009 at 1:34 AM

Alright, it’s sleepy time for me. Thanks AZ for offering the info.

Weight of Glory on August 2, 2009 at 2:50 AM