Accelerated Vehicle Retirement for Fuel Economy: "Cash for Clunkers"

Accelerated Vehicle Retirement for Fuel Economy: "Cash for Clunkers"

Accelerated Vehicle Retirement for
Fuel Economy: “Cash for Clunkers”
Brent D. Yacobucci
Specialist in Energy and Environmental Policy
Bill Canis
Specialist in Industrial Organization and Business
March 3, 2010
Congressional Research Service
7-5700
www.crs.gov
R40654
CRS Report for Congress
P
repared for Members and Committees of Congress

Accelerated Vehicle Retirement for Fuel Economy: “Cash for Clunkers”

Summary
In an attempt to boost sagging U.S. auto sales and to promote higher vehicle fuel economy, the
President signed legislation on June 24, 2009, P.L. 111-32, establishing a program to provide
rebates to prospective purchasers toward the purchase of new, fuel-efficient vehicles, provided the
trade-in vehicles are scrapped. The program was known as Consumer Assistance to Recycle and
Save (CARS), or, informally, as “cash for clunkers.” It provided rebates of $3,500 or $4,500,
depending on fuel economy and vehicle type of both the new vehicle and the vehicle to be
disposed of. Congress appropriated $3 billion for the program in two separate installments. CARS
ran for a month, from July 24, 2009, until August 25, 2009.
During this period, nearly 700,000 vehicles were traded. Estimates of new vehicle sales induced
by the rebate system range from 125,000 to as many as 440,000. Motor vehicle sales in August
2009 hit 14 million seasonally adjusted units, compared to only 9.5 million being sold on a
seasonally adjusted basis in the first six months of 2009. These CARS-assisted summer sales
helped propel overall 2009 car sales to 10.4 million units, comparable to annual sales for 2008.
After officially launching on June 24, 2009, when NHTSA regulations were issued, the CARS
program was embraced by thousands of consumers and by auto dealers across the country, who
advertised it widely. By the end of the first week, the U.S. Department of Transportation (DOT)
announced that nearly all of the initial $1 billion in funds appropriated for it were committed,
based on rising dealer applications for rebate reimbursements and surveying of dealer backlogs.
Recognizing the stimulative effect of the program, the House of Representatives voted to
appropriate an additional $2 billion (H.R. 3435) on July 31, 2009, tapping funds from the
economic recovery act (American Recovery and Reinvestment Act, or ARRA, P.L. 111-5). The
Senate followed suit on August 6, 2009, and President Obama signed the supplemental CARS
funding into law (P.L. 111-47) on August 7, 2009.
By most measures, CARS was successful in stimulating auto sales. Among the benchmarks listed
by NHTSA, which oversaw CARS:
• August 2009 sales were 43% higher than in June 2009, the last pre-CARS
month;
• The total value of all CARS transactions was $15.2 billion;
• About 60,000 jobs were estimated to have been created in auto parts, assembly,
and sales, and an estimated $7.8 billion added to U.S. Gross Domestic Product.
Similar programs have been implemented in various U.S. states, but this was the first federal
program. In general those state pilot programs focused on retiring vehicles with older, and in
some cases malfunctioning, emissions control systems in order to promote better air quality.
CARS focused, instead, on higher fuel economy and promoting U.S. auto sales. Similar vehicle
retirement programs have been implemented in other countries, such as Japan, Germany, France,
and China, and provided a similar boost in auto sales.
This report outlines the key provisions of the CARS program and discusses the impact of the
program on the economy. It also summarizes similar programs in other industrial countries.

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Accelerated Vehicle Retirement for Fuel Economy: “Cash for Clunkers”

Contents
Introduction ................................................................................................................................ 1
CARS Program ........................................................................................................................... 2
Program Regulations............................................................................................................. 3
Value of a Rebate .................................................................................................................. 3
Eligible Trade-in Vehicle................................................................................................. 4
Eligible New Vehicle....................................................................................................... 4
Rebate Value ................................................................................................................... 4
Impact of the Program: Expectations and Reality .................................................................. 5
Impact on Auto Industry/Sales......................................................................................... 5
Petroleum and Emissions Savings ................................................................................... 6
CARS Program Results................................................................................................... 7
Comparison to Programs in Other Major Industrial Countries.................................................... 11

Tables
Table 1. Criteria for Determining CARS Rebate Value................................................................. 4
Table 2. CARS Program by the Numbers .................................................................................... 8
Table 3. New Motor Vehicles Purchased Under CARS ................................................................ 9
Table 4. Country of Origin of CARS Vehicles ........................................................................... 10
Table 5. Recent Foreign Fleet Modernization Programs in Major Industrial Countries ............... 13

Contacts
Author Contact Information ...................................................................................................... 14

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Accelerated Vehicle Retirement for Fuel Economy: “Cash for Clunkers”

Introduction
A severe recession and major decline in auto sales in 2009 motivated lawmakers to consider ways
to support the domestic automotive industry. Since December 2008, a new, expanded federal
presence in the automotive industry has developed, including new grant and loan programs,
support through the Troubled Asset Relief Program (TARP), and partial federal ownership of
Chrysler and General Motors. Coupled with the economic concerns about the auto industry have
been historically high gasoline prices experienced through the summer of 2008 and the prospect
of future price hikes when the global recession ends. In response to high fuel prices and growing
concerns over greenhouse gas emissions and climate change, Congress has pursued new policies
on fuel economy, including tighter Corporate Average Fuel Economy (CAFE) standards enacted
in the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140), as well as even
tighter standards on fuel economy and greenhouse gases proposed by the Obama Administration’s
EPA.1
As a way to promote new vehicle sales, higher fuel economy, and lower emissions, an accelerated
vehicle retirement (AVR)—also called “cash for clunkers” or fleet modernization—program was
enacted in 2009.2 AVR programs provide financial incentives for a vehicle owner to “retire”—that
is, usually shred or crush3—an old vehicle and purchase a new vehicle. Previous state-level AVR
programs4 in the United States have generally focused on air quality,5 since newer tailpipe
emissions standards are significantly more stringent than older standards,6 and many older
vehicles no longer meet the less stringent standards for which they were originally certified.
However, some recent programs abroad have focused directly on motivating new vehicle sales
and propping up the automotive sector.
The 2009 Consumer Assistance to Recycle and Save (CARS) was part of these initiatives to both
address the health of the domestic auto industry and to retire older, inefficient vehicles. To boost
sagging U.S. auto sales and to promote higher vehicle fuel economy, Congress passed several
proposals in 2009:
• On June 9, 2009, the House passed a CARS authorization, H.R. 2751, for a four-
year, $4 billion program; the Senate did not act on it.

1 For more information on CAFE standards and the Administration proposal, see CRS Report R40166, Automobile and
Light Truck Fuel Economy: The CAFE Standards, by Brent D. Yacobucci and Robert Bamberger.
2 The official name of the legislation establishing the program was Consumer Assistance to Recycle and Save (CARS).
3 In most cases, the state or the dealer is responsible for scrapping the old vehicle. In the case of the federal AVR
program (CARS) the dealer, not the consumer, was responsible for transferring the old vehicle to a facility for
scrappage.
4 For more information on these programs, see CRS Report 96-766, A Clean Air Option: Cash for Clunkers, by David
M. Bearden.
5 Specifically to remove the most polluting vehicles from the road to help the states comply with National Ambient Air
Quality Standards (NAAQS) for ozone and particulate matter.
6 For example, federal standards for hydrocarbon emissions from new cars are 94% lower then they were 30 years ago
(1970). Nitrogen oxide (NOx) standards are 97% lower. J.G. Calvert, J.B. Heywood, and R.F. Sawyer, et al.,
“Achieving Acceptable Air Quality: Some Reflections on Controlling Vehicle Emissions,” Science, vol. 261 (July 2,
1993), p. 37; Frank M. Black, “Control of Motor Vehicle Emissions—The U.S. Experience,” Critical Reviews in
Environmental Control, vol. 21 (1991), p. 376; National Research Council, State and Federal Standards for Mobile
Source Emissions, 2006, pp. 92-93; CRS Report RS20247, EPA's Tier 2 Emission Standards for New Motor Vehicles:
A Fact Sheet, by David M. Bearden.
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• On June 18, 2009, the Senate passed the conference report to the Supplemental
Appropriations Act of 2009 (H.R. 2346) that the House had passed two days
earlier. While focused on supplemental military appropriations, Title XIII of the
bill included a scaled-down version of CARS. Added in conference, the provision
is similar to H.R. 2751,7 but appropriated a billion dollar program instead of the
$4 billion in the earlier, House-passed legislation. A bill with more stringent
qualification requirements had been introduced in the Senate (S. 247), but was
never considered on the Senate floor. The President signed the supplemental bill
on June 24, 2009 (P.L. 111-32).
• With the $1 billion funding running out for CARS after only a week, Congress
turned again to CARS funding before the summer recess. On June 31, 2009, the
House passed H.R. 3435, appropriating an additional $2 billion for CARS, with
funding to be taken from the economic stimulus law, the American Recovery and
Reinvestment Act of 2009 (P.L. 111-5). The Senate passed the bill on August 6,
and President Obama signed the bill into law (P.L. 111-47) on August 7. The
CARS program would have ended if additional funds had not been approved.
The CARS program provided consumers with a rebate of up to $4,500 toward the purchase of a
new, more fuel-efficient vehicle. The value of the rebate was based on the fuel economy and fuel
savings of the new vehicle compared to the old vehicle, as well as the vehicle class of both (i.e.,
passenger car, light truck, or work truck). To qualify for a rebate, the auto dealer certified that the
engine of the old vehicle would be disabled, and that the vehicle was sent to be crushed or
shredded.
CARS combined the goal of promoting auto sales with improved fuel economy. The general
argument has been that the United States is at a critical juncture and has an opportunity to use any
recovery in the auto sector to foster a switch to more fuel efficient vehicles. Therefore, most cash
for clunkers proposals in the 111th Congress, including the legislation signed by the President,
have tied incentives to the purchase of vehicles with higher fuel economy.
CARS Program
As enacted, the CARS program provided a rebate toward the purchase of a new, more fuel-
efficient vehicle, provided the old vehicle was transferred by the auto dealer to a facility where it
was crushed or shredded. Consumers were not responsible for the actual scrapping of the vehicle.
The legislation established many of the elements necessary for the program, including the criteria
for obtaining a rebate, as well as requirements for auto dealers to be registered under the program.
The National Highway Traffic Safety Administration (NHTSA), within DOT, had responsibility
for developing regulations to implement the program. Although some original proposals limited
CARS rebates to vehicles manufactured in the United States or North America, these limitations
were removed over concerns that the CARS program be compliant with World Trade
Organization (WTO) rules, and so buyers were eligible for a rebate regardless of where the
vehicle was made.

7 The key difference is while H.R. 2751 authorized $4 billion for a one-year program, with the actual funding subject to
appropriation, the Supplemental appropriated $1 billion for a four-month program, through October 2009.
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Program Regulations
NHTSA was given one month to develop regulations implementing the program, and it did so,
issuing them and officially launching the CARS program on July 24, 2009.8 Those regulations
include
• procedures for dealers to register for the program;
• procedures for dealer reimbursement for the value of the rebate within 10 days of
submitting required information;
• a prohibition on dealers using the rebate to offset other rebates or discounts;
• a requirement that dealers disclose the estimated scrappage value of the trade-in
and to retain up to $50 of the actual scrappage value for administrative costs;
• requirements and procedures for the disposal of trade-in vehicles; and
• enforcement of penalties (up to $15,000 per violation of the above requirements
and prohibitions).
P.L. 111-32 includes a clause “[n]otwithstanding the requirements of section 553 of title 5, United
States Code, the Secretary shall promulgate final regulations to implement the Program not later
than 30 days after the date of the enactment of this Act.” Despite various statutory requirements
that could have precluded promulgation of regulations within 30 days—most notably the
Administrative Procedure Act, which generally requires sufficient time for public notice and
opportunity for comment on proposed regulations9—the regulations were issued on time.
Value of a Rebate
Under the CARS program, NHTSA issued rebates directly to auto dealers when they sold an
eligible vehicle after July 1, 2009, and until funding ran out at the end of August. The value of the
rebate was deducted from the price of the vehicle and the dealer was in turn reimbursed by
NHTSA. Only one rebate was allowed per person, and only one rebate was issued per vehicle
(regardless of the number of joint owners). NHTSA issued rebates only up to the total value of its
appropriation (initially $1 billion for the CARS program, increased by an additional $2 billion on
August 7).
The value of the rebate was based on the type of new vehicle purchased, the type of trade-in
vehicle, and the fuel economy of both. Four classes of vehicles were eligible: (1) passenger
automobiles (cars); (2) category 1 trucks10 (sport utility vehicles and smaller vans and pickup
trucks); (3) category 2 trucks (larger light-duty pickup trucks and vans); and (4) category 3 trucks
(medium-duty pickup trucks and cargo trucks and vans).

8 Although not officially under way until July 24, 2009, a number of auto manufacturers encouraged their dealers to
begin trading under the system as early as the first week in July, promising that they would guarantee the transactions,
as long as they followed the law. This created a backlog of transactions that were filed with NHTSA starting on July
24, 2009.
9 For more information on the Administrative Procedure Act, see CRS Report RL32240, The Federal Rulemaking
Process: An Overview, by Curtis W. Copeland.
10 These category definitions are different from the weight-based definitions used to classify trucks (e.g., classes 1
through 8) generally.
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Eligible Trade-in Vehicle
To qualify for the rebate, the trade-in vehicle had to be in drivable condition; had to be
continuously insured by the same owner for at least one year;11 and had to have been
manufactured less than 25 years before the date of trade-in (i.e. since 1984). For all vehicles
except category 3 trucks, the trade-in vehicle had to have a combined estimated new
Environmental Protection Agency (EPA)-rated fuel economy (as defined on the fueleconomy.gov
website) of no more than 18 miles per gallon (mpg). Category 3 trucks had to be from model year
2001 or newer.
Eligible New Vehicle
To qualify for the rebate, the manufacturer’s suggested retail price (MSRP) had to be less than
$45,000 for the new vehicle. For cars and category 1 and 2 trucks, the vehicle had to comply with
EPA’s Tier 2 emissions standards, and for category 3 trucks the vehicle had to comply with new
heavy-duty engine standards. Except for category 3 trucks, new vehicles had to meet the
following mileage standards: 22 mpg for a passenger car; 18 mpg for a category 1 truck; and 15
mpg for a category 2 truck.
Rebate Value
Rebates were worth either $3,500 or $4,500, depending on different parameters, as shown in
Table 1.
Table 1. Criteria for Determining CARS Rebate Value

New Vehicle Category
Passenger
Rebate Value
Automobile
Category 1 Truck
Category 2 Truck
Category 3 Truck
$4,500
At least 10 mpg
At least 5 mpg higher At least 2 mpg higher None
higher fuel economy
than trade-in
than trade-in
than trade-in
18 mpg minimum
15 mpg minimum
22mpg minimum
$3,500
At least 4 mpg
At least 2 mpg higher At least 1 mpg higher Trade-in is a MY2001
higher than trade-in
than trade-in
than trade-in OR
or newer category 3
trade-in is a MY2001
truck
22mpg minimum
18 mpg minimum
or newer category 3
truck
Trade-in is of similar
size or larger than
15 mpg minimum
new truck
Source: CRS Analysis of H.R. 2346.
Note: Category 1 includes sport utility vehicles and smaller vans and pickup trucks. Category 2 includes larger
pickup trucks and vans. Category 3 includes medium-duty pickup trucks, cargo trucks, and cargo vans.

11 Because two states, New Hampshire and Wisconsin, do not require auto insurance under state law, NHTSA updated
its regulations to exempt vehicles in those two states from the insurance requirement. National Highway Traffic Safety
Administration, Requirements and Procedures for the Consumer Assistance to Recycle and Save Program, Docket No.
NHTSA-2009-0120, Washington, DC, August 2009, http://www.cars.gov/files/amendment.pdf.
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Impact of the Program: Expectations and Reality
Impact on Auto Industry/Sales
Originally, the impact of the CARS program on the auto industry was expected to be limited by
the narrow scope of the program. First, the program was limited to vehicles purchased over a
month-long period in the summer of 2009. Second, the number of rebates was limited to the
available appropriation—only about 222,000 to 286,000 rebates were expected to be issued under
the initial $1 billion appropriation,12 and about 750,000 under the total $3 billion program.13
Therefore, it was thought that this program would more likely provide a “shot in the arm” to U.S.
auto sales rather than provoking a systemic change in the auto industry, the new vehicle fleet, or
fleet-wide fuel economy.
After the CARS program ended, it became clear that it had, in fact, provided a positive stimulus
for auto sales, by drawing back many would-be consumers to auto showrooms. As the program
was wrapping up, Transportation Secretary Ray LaHood said,
American consumers and workers were the clear winners thanks to the cash for clunkers
program. Manufacturing plants have added shifts and recalled workers. Moribund
showrooms were brought back to life and consumers bought fuel efficient cars that will save
them money and improve the environment.14
Estimates of the number of car sales prompted by the program vary. The Council of Economic
Advisers (CEA) reviewed the CARS program, noting that “our baseline analysis below will
assume 50,000 postponed June sales, which yields an estimate of 440,000 net CARS-induced
sales over the June-July-August time frame.”15 The CEA estimated that CARS raised economic
growth in the third quarter 2009 by between 0.1% and 0.4%, at an annual rate, due to increased
retail sales of motor vehicles in July and August, 2009. The CEA report adds this caveat:
To put it another way, the estimates imply that the $3 billion program will increase output in
the automobile sector in the second half of the year by between about $2.5 billion and $6
billion—a substantial direct effect. It is important to note, however, that the boost to the level
of GDP is temporary, and is followed by a drop that slightly more than reverses the increase,
reflecting the slightly lower level of sales in the “payback” period.16
Edmunds.com, an online source for auto research and information, painted a very different
picture. It estimated that only 125,000 of the 690,000 sales were prompted by the federal rebates
and that rising auto sales were prompted by a rebounding auto market. Edmunds issued a press
release in October 2009 saying that the rest of the sales would have taken place without “cash for

12 Assuming $1 billion, and assuming all rebates are worth $4,500, NHTSA could issue 222,222 rebates. Assuming all
rebates are worth $3,500, NHTSA could issue 285,714 rebates.
13 Council of Economic Advisers, “Economic Analysis of the Car Allowance Rebate System,” September 10, 2009,
p. 2.
14 Statement of DOT Secretary LaHood, issued by DOT, August 26, 2009.
15 Council of Economic Advisers, “Economic Analysis of the Car Allowance Rebate System,” September 10, 2009,
p. 4.
16 Ibid., p. 12. The “payback” period is a reference to the likely pull forward effect of CARS, bringing forward sales in
summer 2009 that would have otherwise taken place later in 2009 or in later years.
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clunkers” and stating that “taxpayers paid $24,000 per vehicle sold.”17 Edmunds developed this
estimate by dividing the $3 billion federal program by the 125,000 vehicle sales it says were
spurred.18
A third estimate of sales induced by “cash for clunkers” was developed by the Center for
Automotive Research (CAR) in Ann Arbor, Michigan, which estimated that 303,000 vehicles sold
in July and August 2009 were induced by the rebates. CAR looked beyond the summer duration
of the clunkers program and further estimated that there was a net positive effect on sales after the
clunkers program ended, thereby concluding that 395,000 new vehicles were spurred by the
rebates.19
CEA also suggested that the fourth quarter 2009 GDP would benefit as automakers increased
production after CARS to replace depleted inventories: Ford, GM, and Honda announced third
and fourth quarter production increases at U.S. facilities. CEA estimated that 60,000 jobs had
been saved or created as a result of CARS.
U.S. sales of cars and light trucks, at a seasonally adjusted annual rate, hit 14 million units in
August 2009, far ahead of the 9.5 million units sold in the first six months of the year. 20 While
sales in September then fell to about 8 million units, reflecting sales moved forward by “cash for
clunkers,” sales in the rest of 2009 were stronger, finishing out with an especially strong
December and overall, seasonally adjusted sales for all of 2009 reached 10.4 million units.
Petroleum and Emissions Savings
In its report to Congress, NHTSA estimates that the CARS program will save roughly 820 million
gallons of fuel and 9.5 million metric tons of carbon dioxide over the next 25 years. These
savings are relatively small compared to projected fuel consumption and transportation emissions.
For example, compared to the Energy Information Administration’s (EIA) estimates for motor
gasoline consumption and carbon dioxide emissions from petroleum consumption in 2020 in the
transportation sector, the estimated annual savings from the CARS program represent roughly
0.02% of both consumption and emissions.21 The CARS program has been criticized by

17 Edmunds.com, “Cash for Clunkers Results Finally In: Taxpayers Paid $24,000 per vehicle sold, Report
Edmunds.com,” October 28, 2009.
18 The Obama Administration rebutted the Edmunds.com estimate and said, “The Edmunds' analysis rests on the
assumption that the market for cars that didn't qualify for Cash for Clunkers was completely unaffected by this
program. In other words, all the other cars were being sold on Mars, while the rest of the country was caught up in the
excitement of the Cash for Clunkers program. This analysis ignores not only the price impacts that a program like Cash
for Clunkers has on the rest of the vehicle market, but the reports from across the country that people were drawn into
dealerships by the Cash for Clunkers program and ended up buying cars even though their old car was not eligible for
the program... Edmunds also ignores the beneficial impact that the program will have on 4th Quarter GDP because
automakers have ramped up their production to rebuild their depleted inventories.” Source: National Public Radio:
“Edmunds.com Cash for Clunkers Analysis Riles Obama Team,” October 29, 1009.
19 Center for Automotive Research, “The Economic and Fiscal Contributions of the ‘Cash for Clunkers’ Program—
National and State Effects,” January 14, 2010.
20 BusinessWeek, “After the Clunkers Party, an Auto Sales Hangover,” September 1, 2009.
21 The CARS program will save roughly 33 million gallons of gasoline per year and 380,000 metric tons of carbon
dioxide. In its preliminary Annual Energy Outlook for 2010, EIA estimates that 141 billion gallons of motor gasoline
will be consumed, and roughly 1.9 billion metric tons of carbon dioxide will be emitted from petroleum combustion in
the transportation sector. U.S. Energy Information Administration, Annual Energy Outlook 2010 Early Release
Overview, DOE/EIA-0383(2009), Washington, DC, December 14, 2009, Tables A11 and A18, http://www.eia.doe.gov/
(continued...)
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environmentalists because its scope was too small to affect significant change in the auto sector,
and the required increases in fuel economy were not stringent enough.22
However, regardless of the size of the program, the costs of the program may balance the benefits
in at least one sense. In its report, NHTSA estimates that the fuel saved from the program will
lead to cumulative savings of between $1.3 billion and $2.7 billion over the next 25 years.23
Assuming a social cost of carbon dioxide of $20 (the mid-range of NHTSA’s scenarios),24 the
social benefit of the reduced carbon dioxide emissions from both fuel savings and new vehicle
production is between $0.2 billion and $0.3 billion.25 Thus total cumulative social benefits from
reduced gasoline consumption and emissions range between $1.5 billion and $3.0 billion. The
upper end of this range is roughly in line with the total federal appropriation for the program.
That said, while the net costs and benefits to society may be equal, those who received rebates
from the program will benefit (both through reduced vehicle purchase price and reduced fuel
costs) more than those who did not receive rebates.
CARS Program Results
About 690,114 CARS vouchers were submitted in July and August 2009 and NHTSA had
reviewed 99% of them by late September. Eligible CARS sales reported on the NHTSA hotline
grew from about 4,000 on the first day to six times that a few days later. This surge in sales and
reporting is one reason that many dealers had difficulty in reaching NHTSA to register and report
their eligible sales. According to a survey by Automotive News, 90% of dealers were dissatisfied
with the time it took to be reimbursed by the government.26
This large surge in transactions in a short period of time overwhelmed the initial DOT system
and, eventually, 7,000 people were assigned to review the transactions, many of them contract
employees.27

(...continued)
oiaf/aeo/index.html.
22 American Council for an Energy-Efficient Economy, Vehicle Scrappage Program Needs Repair, Washington, DC,
May 6, 2009, http://www.aceee.org/press/0905scrappage.htm.
23 The range depends on the discount rate for future savings. If future savings are not discounted, then the present value
of those savings is higher. If the future is discounted, the present value of the savings is lower. U.S. Department of
Transportation, National Highway Traffic Safety Administration, Consumer Assistance to Recycle and Save Act of
2009, Washington, DC, December 2009, p. 46.
24 It should be noted that estimates for the social cost of carbon vary widely, from zero for those who believe that the
effects of greenhouse gas emissions are negligible, to hundreds of dollars for those who believe that the effects of
climate change could be drastic.
25 Again, this range depends on the discount rate (between 0% and 7%). Ibid., p. 49.
26 Automotive News survey reported on August 3, 2009.
27 The initial delays in processing CARS applications were eventually remedied. According to NHTSA’s December
2009 report to Congress: “NHTSA did not anticipate the volume of the initial demand on the CARS system or a tripling
of the demand on that system just twelve days after it began as a result of additional appropriations. Nor did the agency
anticipate that the statute’s many requirements and those added by NHTSA’s rule in order to help deter fraud would
prove so difficult for many dealers to meet without repeated submissions. More than half of all the submissions had to
be submitted and reviewed more than once, and tens of thousands of them took several iterations before approval was
possible. Moreover, to ensure the integrity of the process, any transaction had to be reviewed by two different people in
order to be approved for payment. In all, NHTSA conducted approximately two million transaction reviews in order to
eventually approve 677,000 requests for payment. Nevertheless, despite the many obstacles it faced and the
unprecedented nature of this program, NHTSA managed to achieve an overall mean processing time of 16.9 days from
(continued...)
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Table 2. CARS Program by the Numbers
(Highlights of the Motor Vehicle Rebate Program)
Benchmark
Result
Number of motor vehicle dealers that participated

18,908
States that participateda
50
Number of voucher applications submitted to NHTSA

690,114
Number of voucher applications paid

677,842
Number of voucher applications cancel ed by dealers

12,272
Average voucher

$4,209
Total federal funds paid out in vouchers

$2.85 billion
Trade-ins that were passenger cars

14%
New vehicles that were passenger cars

59%
Trade-ins that were SUVs or trucks

85%
New vehicles that were SUVs or trucks

41%
Average age of vehicles traded in

14 years
Average odometer reading of trade-ins

160,170 miles
Average combined EPA fuel economy rating of trade-ins

15.7 mpg
Average combined EPA fuel economy rating of new
24.9
mpg
vehicles
Estimated number of jobs saved or created

60,000
Percent of new vehicles manufactured domestical y

49%
Estimated reduction in carbon dioxide emissions and

9 million metric tons
related greenhouse gases over 25 years
Resulting fuel consumption reduction
824
million gallons (33 million gallons
over 25 years
per year)
Source: National Highway Traffic Safety Administration (NHTSA), “Consumer Assistance to Recycle and Save
Act of 2009: Report to Congress,” December 2009.
Notes: Category 3 trucks, used mainly for commercial purposes, were also eligible for CARS and constituted
one percent or less of the trade-ins and new vehicles.
a. In addition to the 50 states, dealers in Puerto Rico, Guam and the U.S. Virgin Islands also participated.
According to the December 2009 report to Congress on the CARS program by NHTSA, and
shown in Table 2, most of the vehicle trade-ins were SUVs and light trucks, whereas most newly-
purchased vehicles were cars. The NHTSA report noted that “The total new vehicles sold or
leased under the CARS program included 401,274 passenger cars, 274,602 light trucks (Category
1 and 2) and 1,966 heavy trucks (Category 3). The top ten models sold under the program were:

(...continued)
the final submission (i.e., when all necessary documentation was included and errors corrected) of a transaction to the
date of payment.”
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1. Toyota Corolla
2. Honda Civic
3. Toyota Camry
4. Ford Focus FWD
5. Hyundai Elantra
6. Nissan Versa
7. Toyota Prius
8. Honda Accord
9. Honda Fit
10. Ford Escape FWD
Table 3. New Motor Vehicles Purchased Under CARS
(by make of vehicle)
Make Of New Vehicle
Number of Transactions
Share of New Vehicles (%)
Toyota 120,507
17.78
Ford 90,135
13.30
Honda 87,585
12.92
Chevrolet 86,354
12.74
Nissan 58,700
8.66
Hyundai 48,780
7.20
Kia 28,974
4.27
Dodge 24,119
3.56
Subaru 16,816
2.48
Pontiac 16,644
2.46
Mazda 16,144
2.38
VW 12,418
1.83
Jeep 11,211
1.65
GMC 9,704
1.43
Chrysler 9,033
1.33
Scion 7,851
1.16
Mercury 6,626
0.98
Saturn 5,334
0.79
Suzuki 3,707
0.55
Lexus 3,663
0.54
Other 13,537
2.00
Total 677,842
100.00
Source: National Highway Traffic Safety, Report to Congress on CARS Program, December 2009, p. 24
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The model breakdown of the 677,842 new vehicles purchased through CARS is shown in Table
3. It is notable that Chrysler’s three brands—Jeep, Dodge and Chrysler—sold less than 7% of
CARS vehicles because the company shut down all its plants in the spring as part of its
bankruptcy and restructuring. The timing of the CARS program caught Chrysler with not enough
inventory on hand, and so it ran out of vehicles to sell during the CARS program.
Of all the motor vehicles sold during CARS, just under half were made in the United States,
according to NHTSA. The largest number of non-U.S. cars sold was imported from Japan, as
shown in Table 4.
Table 4. Country of Origin of CARS Vehicles
Country New
Vehicles Trade-Ins
United States
329,173
499,365
Japan 115,526
54,958
Mexico 81,655
11,307
South Korea
73,119
3,738
Canada 65,177
90,420
Germany 10,056
11,199
Source: NHTSA Report to Congress on CARS Program, December 2009.
One of the concerns about a vehicle retirement program, expressed prior to the CARS enactment,
was that it would pull forward sales that would normally have been made in the following months
and years. The experience with CARS shows that this is a valid issue, but it has had a limited
impact thus far on the recovery of the U.S. retail motor vehicle market.
The major evidence that CARS had pulled sales forward occurred in September 2009, when U.S.
motor vehicle sales fell 40% from the CARS-supported levels of August 2009. Nearly all major
brands saw a fall-off in sales when “cash for clunkers” ended. Overall U.S. motor vehicles sales
came in at a seasonally adjusted annual rate (SAAR) of 9.5% that month, similar to the lackluster
performance in the first half the year and well below the SAAR of 14 million in August 2009.
The change was more modest, however, when compared to year-over-year sales: September 2009
sales were 23% lower than the same month in 2008. Compared to the same month in 2008, Ford’s
sales in September 2009 fell by 5%, GM’s by 45%, Chrysler’s by 42%, Toyota’s by 13% and
Honda’s by 20%. Only Hyundai saw a spike, with sales rising by 27%.28
Fourth quarter U.S. auto sales—October through December—took on a more robust complexion,
however, indicating that the pull-forward effects of CARS seemed fairly limited. October sales
ran at 10.4 million SAAR, November’s at 10.9 million and December’s at 11.9 million.29 Despite

28 September 2009 data on auto sales is from CNNMoney.com, “Auto Sales Fall as Clunkers Rush Ends,” October 1,
2009.
29 ABCnews.go.com, “Ford Surges as U.S. Auto Sales End Year on Uptick,” January 5, 2010 and Automotive News,
“Ford, Hyundai and Toyota Lead Industry to 15% Gain,” January 5, 2010.
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these gains during the year, 2009 was the worst year for U.S. car sales since 1982 and the lowest
on a per capita basis since 1950.30
Comparison to Programs in Other Major Industrial
Countries
AVR31 programs have been popular in other countries around the world, from Japan, Korea and
China in Asia to many European countries and Russia. (See Table 5.)
In Europe, at least 13 countries enacted AVR rebates and tax incentives in 2009.32 In addition to
the European countries shown in Table 5, these countries also offered programs: The
Netherlands, Portugal, Romania, Luxembourg, Cyprus, Slovakia, and Greece. Some European
programs (such as the one in France) required that the new vehicle have tighter emissions
standards, but others did not have such a requirement (such as the UK’s).
One of the most-discussed programs has been Germany’s, which provided vouchers for 2,500
Euro (roughly $3,500)33 toward the purchase of a new vehicle for scrapping a vehicle at least nine
years old. It is credited with boosting auto sales during its one year duration by over 25%. These
rebate programs had less dramatic impacts elsewhere, increasing auto sales in France by 4.2%
and Austria by over 6%, for example. (In the European Union, auto sales in 2009 were 13.7
million units, down from 15.3 million vehicles sold in 2008 and lower than the 16-16.5 million
vehicles sold each year earlier in the decade.)
The success of some European scrappage programs was evident soon after they were enacted in
2009. According to BusinessWeek, the German “cash for clunkers” program “caused auto sales to
spike 21.5% in February [2009] and created the best sales quarter for GM’s Opel brand in a
decade.”34 In June 2009, European auto sales rose by 2.4%, “their first year-on-year rise in 14
months, thanks almost entirely to scrappage schemes in a dozen countries.”35 Some analysts say
these programs may eventually lead to a “severe slump in car sales after the expiration of the
incentives, which they say will artificially pull forward demand for new cars. ‘We’re definitely
setting up problems for the future,’” said an auto industry analyst at UBS in London.36 When the
French offered a similar program in the 1990s, sales fell by 20% when it ended.37

30 Automotive News, “Analysts See Signs of Life After Miserable Year,” January 11, 2010.
31 AVR is accelerated vehicle recovery.
32 Data in this section on European scrappage programs is sourced from the European Automobile Manufacturers
Association (ACEA). Website viewed January 22, 2010.
33 All currency conversions are from Washingtonpost.com, World Currencies—Current Values and Conversion Tool,
June 22, 2009, http://financial.washingtonpost.com/custom/wpost/html-currencies.asp. 1 Euro = $1.38.
1 Japanese Yen = $0.0103. 1 Canadian dollar = $0.882. 1 British pound = $1.643.
34 BusinessWeek, “Cash-for-Clunkers Proposals Gain Popular Traction,” April 1, 2009.
35 Financial Times, “US Drives Its Claws into Scrappage Deals,” July 31, 2009.
36 Ibid.
37 The Globe and Mail, “The Ugly Economics Behind Europe’s Car Scrappage Bonanza,” May 16, 2009.
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Similarly, Japan is offering a 250,000 Yen (about $2,600) subsidy for turning in a car at least 13
years old.38 The Japanese government plans to extend the program from its March 2010 deadline
until September 2010.
The initial Japanese clunkers program did not permit U.S.-made vehicles to participate, but the
extension will permit some low-emission U.S. cars to be eligible. Under Japanese car import
rules, all vehicles are subject to an expensive testing procedure, the Type Approval System. For
about 30 years, the Japanese government has offered an alternative, less costly certification
system for automakers who sell only a limited number of models a year there. Known as the
Preferential Handling Procedure, or PHP, it relies, in the case of U.S. automobiles, on EPA and
other U.S. standards. The original Japanese clunkers program specifically excluded all PHP
vehicles, which the government argued did generally not meet their AVR standards of low
emissions and high fuel economy. In January 2010, the government decided to modify the
program to permit certain PHP vehicles to qualify for purchase under the rebate program.
China’s auto market, assisted by several purchased incentive programs, grew by 45% to over 13.6
million vehicles sales in 2009, boosting it for the first time to the largest automobile market in the
world, replacing the United States in that category.39 China’s auto sales are expected to rise by
10% or more in 2010 according to some observers.

38 Japan has recently agreed to extend its ATV program until September 2010.
39 By comparison, in 2009, there were 10.4 million vehicles sold in the United States.
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Table 5. Recent Foreign Fleet Modernization Programs in Major Industrial Countries
Country
Production and Sales Incentives
Canada
The Canadian government approved C$92 million to support a limited scrappage
program for vehicles produced before 1996 when more stringent pollution laws were
enacted. The “Retire Your Ride” program offers consumers C$300 to scrap their older
vehicle, a program administered by a nonprofit foundation. Although auto dealers and
manufacturers called on the federal government to commit $350 million to a scrappage
program that would offer consumer a $3,500 voucher to trade in cars that are at least
10 years old, the federal government did not enact the larger program.a As much as 75%
of Canadian vehicles are made elsewhere, and it was thought that clunkers program
would do little to stimulate the Canadian economy.
Europe
France
A fleet modernization plan was in effect for a year and provided motorists with a €1,000
($1,400) subsidy and a staggered tax rebate of up to €5,000 if they replaced and
scrapped vehicles more than 10 years old for more fuel efficient vehicles. Eligible-
purchase vehicles had to emit reduced carbon dioxide. The French government set aside
€380 million for this program,b which ended in December 2009; French sales rose nearly
11% in 2009. Proposed extensions of the program of up to a year—until the end of
2010—may be considered by the government.
Germany
Germany had one of the most successful fleet modernization programs, where
consumers scrapping at least a nine-year-old vehicle received a €2,500 subsidy ($3,500).
Trade-ins had to have been certified as scrapped, with certain parts recycled. The
government provided €5 billion to fund it.c Eligible vehicles had to be more than 9 years
old and meet older, Euro 4 emission standards. (The European Union’s Euro 4 emissions
were set in 2005; requirements for reduced nitrogen oxides and particulates are lower
than for comparable U.S. and Japanese vehicles at that time.)
A further tax rebate was available for those who purchased Euro 5/6 compliant vehicles.
(Euro 5 standards took effect in 2009, raising the nitrogen oxide and non-methane
hydrocarbon standard levels; Euro 6 standards will take effect for all vehicles in
2014.)The German scrappage program ran for 7 months, ended in September 2009, and
is credited with boosting sales by over 23%.
Italy
Italy’s 11-month scrappage program was based on a €2 billion stimulus package for auto
and domestic goods industries, including an incentive of €1,500-5,000 to buy a new, less-
polluting motor vehicle.d Cars had to be more than 9 years old and exceed Euro 4
emissions guidelines. The basic €1,500 subsidy could be combined with other incentives
(up to €5,000) for cars running on compressed natural gas, liquefied petroleum gas,
electricity or hydrogen. New cars sales in 2009 were essentially flat.
Spain
Spain’s scrappage program provided a €2,000 ($2,800) subsidy and interest free loans for
the purchase of a new car with low carbon dioxide emissions. Under the program, which
ran for 11 months until October 1, 2009, cars had to be at least 10 years old to be
eligible for trade and then had to be scrapped. The program also applies to used cars no
more than five years old and requires that a scrapped car is at least 15 years old.f
Despite the scrappage incentive, new car sales in Spain fell by nearly 18%, a fact some
attribute to the complexity of the Spanish program.
United Kingdom
With a total of £400 million budget, the UK program provided a “scrappage grant” that
was available from May 2009 until February 2010 to car owners who turned in a car or
van that was at least 10 years old. Owners received a £2,000 ($3,300) subsidy, the cost
of which is split evenly between automakers and the UK government.g New car sales in
the UK fel by over 6% in 2009.
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Accelerated Vehicle Retirement for Fuel Economy: “Cash for Clunkers”

Country
Production and Sales Incentives
Asia
Japan
A fleet modernization program is under way in Japan, with consumers eligible for a
¥250,000 ($2,600) subsidy if they turn in their car (at least 13 years old). New cars must
be used for at least a year.e The government extended the program until September
2010, modifying it to al ow some low-emission US-made vehicles for the first time to be
eligible for the clunkers program.
China
Under China’s stimulus program, sales taxes were cut in half for small cars (under 1.6
liters). Consumers are encouraged to trade in older vehicles with poor emissions, for
which there are rebates of $450 to $900. Rural areas were also targeted, with special
incentives for farmers to buy cars, trucks and motorcycles. The government hopes to
remove about 2.9 million vehicles under its year-long incentive program that ends in May
2010.
South Korea
The government implemented a temporary tax incentive program in May 2009, reducing
taxes to retire an automobile made before 1999, up to a subsidy of 2.5 million Won
($2,041). The program ran from May 1, 2009, until the end of the year. New car
registrations rose by 3.4% for the year.h
Sources: Peterson Institute for International Economics, Money for the Auto Industry: Consistent with WTO Rules?,
February 2009; Does the Auto Bailout Undermine Global Trade Rules, interview with Gary Hufbauer, February 26,
2009; Automotive Trade Policy Council, Foreign Government Actions to Support Their Auto Industries; also see notes
below; European Automobile Manufacturers Association (ACEA), website viewed January 22, 2010. Information
on Euro 4, 5, and 6 emissions standards from http://www.carmall.eu/emission_standards.html.
Note: This table highlights activities in some major industrial countries, but programs have also been enacted in
Austria, Greece, Malaysia, The Netherlands, Portugal, Romania, Slovakia, Turkey, and Taiwan, Source:
Automotive Trade Policy Council.
a. CBC.ca, “Support car sales with $350M ‘scrappage’ program, auto industry pleads,” August 4, 2009.
b. The Wal Street Journal, “In France, Oui to Bailout, Non to Layoffs,” March 19, 2009.
c. The Wal Street Journal, “Merkel Pledges Backing for Opel,” April 1, 2009.
d. The Wal Street Journal, “Italy Passes Stimulus Package,” February 7, 2009.
e. Reuters, “Update1-New Japanese Good For Car Sales-Nissan COO,” April 10, 2009.
f.
Automotive News Europe, “Subsidies Lead to a Mixed May Sales Result in Europe,” June 2, 2009.
g. Deloitte Touche Tohmatsu, Deloitte Says More Needed to Revitalize Ailing Automotive Industry, March 23, 2009.
h. Korea Automotive Manufacturers Association, “Reports & Statistics.”

Author Contact Information

Brent D. Yacobucci
Bill Canis
Specialist in Energy and Environmental Policy
Specialist in Industrial Organization and Business
byacobucci@crs.loc.gov, 7-9662
bcanis@crs.loc.gov, 7-1568

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