Study Finds Cash for Clunkers Program Boosted Average Fuel Economy of All Vehicles Purchased by 0.6 mpg in July and 0.7 mpg in August
|Average fuel economy of purchased new light-duty vehicles by month, including projection without the program. Source: Sivak and Schoettle 2009. Click to enlarge.|
A study by Michael Sivak and Brandon Schoettle at the University of Michigan’s Transportation Research Institute (UMTRI) concluded that the recently concluded Cash for Clunkers program improved the average fuel economy of all vehicles purchased by 0.6 mpg in July 2009 and 0.7 mpg in August 2009.
The Car Allowance Rebate System (CARS)—“Cash for Clunkers”—gave buyers a rebate when they traded in a vehicle while purchasing a new one. Generally, the trade-in vehicles must have had fuel economy of 18 mpg or less and be less than 25 years old. The rebate was either $3,500 or $4,500, depending on the difference between the fuel economy of the new and the trade-in vehicles.
Overall, about 690,000 vehicles were purchased (and traded in) under the program, for almost $3 billion in consumer rebates. (Earlier post.) This compares to a total of about 2,260,000 vehicles sold in July and August 2009. The UMTRI study evaluated the effect of the program on the average fuel economy of all vehicles purchased in July and August 2009.
To estimate the benefits of the program on the overall fuel economy of light-duty vehicles purchased, Sivak and Schoettle first calculated the expected fuel economy of purchased new vehicles without the program. To do this, they used the relationships between economic indicators and the fuel economy of purchased vehicles that they obtained in a recent study to predict the fuel economy for July and August of 2009 without the program, and compared this baseline prediction with actual fuel economy observed for the same months.
The predicted, baseline fuel economy, without the existence of the program, was derived using a model obtained from a regression analysis performed on the data from October 2007 through June 2009. The regression used the unemployment rate and the price of gasoline as the predictors of the fuel economy. The results indicate that the program improved the average fuel economy of all vehicles purchased by 0.6 mpg in July 2009 and 0.7 mpg in August 2009.—Sivak and Schoettle 2009
Michael Sivak and Brandon Schoettle (2009) The Effect of the “Cash for Clunkers” Program on the Overall Fuel Economy of Purchased New Vehicles (UMTRI-2009-34)