So as the news has been busy reporting, the government bailout Car Allowance Rebate System (CARS), aka “Cars for Clunkers” has quickly exhausted it’s ~$1B budget. The legislation allows people to get $3500 to $4500 per trade-in for cars that get 18 mpg or less. The amount of the rebate is based on the improvement in mileage on the new car. If the mileage improvement is at least 4 mpg, the rebate is $3500. If the mileage improvement is at least 10 mpg then the rebate is $4500.
Assuming an average rebate of $4k, approximately 250k cars have been traded in. If each of these vehicles drives an average of 12k miles per year, that’s 3 BILLION miles driven per year. If each of these cars just qualifies for the rebate (i.e. 18 mpg), this would equate to 166.666 (etc.) million gallons of gas. If each vehicle is replaced with a new vehicle getting an average mileage increase of 7 mpg to 25 mpg, the gas used would be reduced to 120 million gallons. That’s a savings of 28%, or almost 47 million gallons of gas per year. That gas at $2.50 a gallon will save $117 M to the consumer per year. The atmosphere will see a CO2 reduction of 8.8kg per gallon or 414 million kilograms (or 414 gigagrams) of CO2 per year.
Assuming these new cars are kept and driven for 5 years, the consumer will see a savings of $583 million on the government’s $1B investment. Of course, there is additional economic reward since some of these cars would not have been otherwise sold.
and the dealers still get to sell the trade-ins for some amount of profit.
Environmentally, there are probably cheaper ways to save 47 million gallons of gas per year, but getting people into more efficient cars has to be a good thing in the long run.