An estimated 125,000 new cars were purchased under the Cash for Clunkers program that would not have otherwise been purchased.
The average difference in gas mileage between the clunker that was traded in and the new car was 2 mpg.
The average driver drives 15,000 miles per year.
If the clunker was getting 15 mpg, it would have taken 1,000 gallons to drive those miles. If the new car gets 17 mpg, the car would require only 882 gallons for a savings of 118 gallons per year. In five years the savings would be 590 gallons per vehicle. For the net 125,000 new vehicles purchased, in five years 73,750,000 gallons of gas would be saved.
The cost of the program was $1 billion dollars. This equals $13.56 for each gallon of gas saved.
Does that sound like a bargain?
Obviously there is more than one way to calculate the savings in gas and I had to make some assumptions in the above calculation. One of the most obvious objections to my calculation is that the cars will be on the road longer than five years and will continue to save fuel. However, I am assuming that if customers had not purchased these cars that they would have delayed their purchase and the future cars they would have purchased instead would have gotten even better mileage than the cars they were enticed to purchase. If, for instance, hybrids gain popularity some people who would otherwise purchase a hybrid sooner will do so later because they will still be driving the car they purchased with the cash for clunkers enticement.
Another factor to consider is that if it cost less to drive a car people may simply drive more miles. This is a variable that is hard to calculate but is realistic. With cheaper gas or better gas mileage people will probably just drive more miles. Also, of course we do not know the future price of gasoline. Higher gas prices would decrease the miles driven thus making the cost per gallon saved even higher.
Another factor to consider is that in five years some of the cars will no longer be in service, others will be the "second" family car and will be driven less miles per year than when it was newer and was considered the first family car. Some of the cars will have been traded in and be driven by lower income people and be driven considerably fewer miles per year than the average of 15,000 miles a year. Some of the cars will simply no longer be in service. So, a five-year calculation seems reasonable, but admittedly this is arbitrary.
If you want to quibble with my figures, go ahead. In any event, whether the cost per gallon of gasoline saved is $9.00 or $13.56 or $21 it is still an expensive way to reduce gas consumption and curtail CO2 emissions. If there is some fatal flaw in my logic or my math, please point it out to me.
Obviously the purpose of the program was to stimulate the economy but it was also sold as a program to reduce gas consumption and help the environment. It was a very costly environmental program.