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The High Cost of Cash for Clunkers

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Abstract:

The $1 billion set aside for the Car Allowance Rebate System (CARS), or "Cash for Clunkers," ran out quickly this summer. CARS aims to encourage the purchase of more fuel-efficient vehicles by offering a $3,500 to $4,500 government-funded rebate to consumers who trade-in vehicles that get less than 18 miles per gallon (mpg) for new cars that get more than 22 mpg or new trucks that get at least 18 mpg. Congress refueled the popular stimulus program with another $2 billion - enough to buy a total of approximately 750,000 trade-ins.