The economic and fiscal contribution of the "cash for clunkers" program: national and state effects

The Consumer Assistance to Recycle and Save (C.A.R.S.) Program, commonly called "Cash for Clunkers" (C4C), was a US$3 billion government incentive to boost automotive industry sales that was in place July 24, 2009 through August 24, 2009 in the United States. The program was widely hailed as a success since 677,081 individuals traded in their older and less fuel efficient vehicles for new vehicles. During this 32-day period, 2009 new vehicle sales peaked and, for the first time in a long time, the industry experienced the first signs of recovery. Aside from the potential environmental benefits associated with the program, the major purpose was to create jobs in the devastated automotive sector of the U.S. economy. The Center for Automotive Research (CAR) estimated net new vehicle sales and employment induced by the C4C Program using a combination of an econometric sales forecast model and an inter-industry multi-region simulation model. Overall, motor vehicle output added 1.45 percentage points to the third-quarter 2.2 percent change in real Gross Domestic Product (GDP). The C4C Program succeeded in improving fuel economy of new vehicles sold, and in providing much needed stimulus to the struggling U.S. automotive industry.