# the math on cash for clunkers.........

Discussion in 'Economy' started by manu1959, Sep 7, 2009.

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### manu1959Left Coast Isolationist

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from a friend of mine via e-mail...........

I guess I must be on the wrong page

A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.

A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.

So, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year.

They claim 700,000 vehicles  so that's 224 million gallons / year.

That equates to a bit over 5 million barrels of oil. 5 million barrels of oil is about ¼ of one day's US consumption. And, 5 million barrels of oil costs about \$350 million dollars at \$75/bbl.

So, we all contributed to spending \$3 billion to save \$350 million.

How good a deal was that ???

But just think, they'll probably do a great job with health care.

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### KittenKoderSenior Member

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You got the math right.

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### Care4allWarrior PrincessSupporting Member

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certainly as a business person, you can sort out the garbage and review this program on the whole, and not just what someone else has said manu?

First, that 350 million should be multiplied by 6-10 years, more than likely 10 years minimum, because these were the classic, long term car owners, that turned in the clunkers for the fuel efficient new car...they more than likely would have also replaced this car with another inefficient used car or held on to it even longer.

\$350 million times 10 is \$3.5 billion saved vs the \$3.0 billion spent....IF YOU really want to even use this argument as the sole argument on the success or failure of cash for clunkers.

There is much to be considered, and all facts are not in yet....we need another 2-3 months to see if the rule of driving capitalism, coveting what thy neighbor has, comes in to play... meaning, after the initial drop in sales, immediate following month, sales should drop...not even meet ly's levels or even their projected sales without a promotion....the month following that, we should see sales projections being met, the 3rd month following this colossal event should show, an uptick in sales....then we will know if this promotion, along with what the car companies can do on their own in promotions that capitalizes off of this clunker promotion, has jump started an upward trend in car sales.

Also, the projection was to sell 250,000, where they normally would sell 200,000 new cars, in 4 months....they outperformed the projection and sold 700,000 cars in 2 months....the next 2 months, they could sell another 100k in new cars....making the total cars sold in 4 months, 800,000 vs. the 200,000 originally projected to be sold during these 4 months...That's a 300% increase in sales...not a 25% increase in sales, which would have been stellar, but a 300% increase in sales....this jump start could be what was needed in the auto industry overall....a stimulus that gets them going again.

Another thing to be considered, is several auto manufacturers reopened plants to start making cars again because of this event....and those that supply the auto plants also got orders off of this event

Also, just the car dealerships alone, generated over 16 billion in sales during this period, and that's using 20k for the average car sale and it was probably higher than such....they paid their commissioned car salesmen a bundle who will be income taxed and a good deal of this money comes back to the federal gvt in the form of taxes...taxes that they would not have been collecting had the promotion not generated sales. These people with the hefty paychecks will be spending their money elsewhere in the economy, buying things others make or sell, giving employment to others, indirectly...but should be calculated in to the success of the event.

The car dealerships will also be paying much more in corporate taxes or income taxes from this colossal event as well....

Honestly manu, I don't see how this particular stimulus, can not be considered a success....especially when taking in to account that it was only \$3 billion of the stupid \$750 billion that they passed in stimulus money and there has been no other successes in stimulating the economy such as this out of all that money, other than one other stimulus, the New home ownership credit has shown success as well, that gave us a 7.6% increase in existing home sales....

but other than those 2, the stimulus seems to have been wasted, or clearly NOT stimulating the economy, as this particular program did.

Care

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