Ball State study confirms ‘Cash for Clunkers’ a success

The Car Allowance Rebate System, commonly known as “Cash for Clunkers,” allowed owners of gas-guzzlers to purchase fuel-efficient vehicles for a lower price this summer, and now the results are being noticed.

Ball State University’s Center for Business and Economic Research Director Mike Hicks used statistical models to clarify the program’s success.

“I constructed a forecast model of automobile sales in the United States, pretending that it was June of 2009 and predicted the number of automobiles to be sold based on common things that influence decisions regarding automobile purchases,” Hicks said.

In these forecast models used, he took into account the employment rate, cost of gasoline and the interest rate.

“Then I predicted how many cars would be sold in July and August using the actual interest rates and unemployment rates,” Hicks said. “I then compared my forecast to the actual number of cars that were sold.”

According to www.cars.gov, the official government site devoted to Cash for Clunkers, “the CARS program helped consumers who turned in gas guzzlers buy nearly 700,000 more fuel efficient vehicles in fewer than 30 days.” 

In an interview with Inside Indiana Business, Hicks said that of the automobiles sold through CARS, only 3,000 to 5,000 would have been swapped had it not been for the trade-in allowances.

“We had 61 customers take advantage of the cash for clunkers program,” said Jeff Routen, a sales manager at Bloomington Ford.

According to www.cars.gov, “The dealer who sold the new vehicle was required to register as a participant and required to submit certain documents to support their request for reimbursement.”

The delayed reimbursements that were associated with CARS were predictable, Hicks said. 

“We are financially sound enough so it wasn’t an issue with us to have roughly $250,000 out on the street for a month,” Routen said. “Although it took awhile to get paid ... they have paid for every single one of them.”

Although the CARS program may have had an impact, Hicks said the complete recovery will take more time.

“I believe it’s very unlikely we will see a turn-around for the big three American auto makers for several months,” Hicks said. “I think they have a lot of work to be viable.”

Routen said he believes the program was a success.

“It helped us obviously, got bad cars off the street and helped out a lot of customers,” Routen said.