Cash for Clunkers Drives Consumers to Fuel-Efficient Choices, Edmunds.com Reports

Cash for Clunkers Drives Consumers to Fuel-Efficient Choices, Edmunds.com Reports

Should the federal government fund a Cash for Clunkers extension, and is it worth the added $2 billion cost as an economic and environmental stimulus?

Those are the questions the Senate considered this week as it debated the extension the House already passed. Data based on real Cash for Clunker transactions by Edmunds.com shows clearly vehicles turned in as clunkers -- mostly gas-guzzling trucks and SUVs -- would have been traded in at some point even without the program.

However, those vehicles were traded for vehicles that were more likely to be cars than trucks or SUVS and vehicles that deliver better fuel economy with the $3,500 to $4,500 government vouchers provided under the Car Allowance Rebate System (CARS).

Further, the clunker plan appears to have had a rub-off effect. The program created a feeding frenzy, with the last week of July generating a seasonally adjusted selling rate of a stunning 19.6 million vehicles. And those consumers buying vehicles regardless of trade-ins opted for smaller, more fuel-efficient cars during the Cash for Clunker program at a higher than usual rate.

Edmunds.com collected a sample of actual trade-in and new-car sales transactions that occurred under the Cash for Clunkers program from its July 24 launch to July 31. The baseline data for comparison consists of a sample of actual transactions that occurred in May and June, including trade-ins that would have qualified as clunkers if the CARS program had existed at the time.

Clunkers Traded

Edmunds.com's data shows vehicles traded in under the Cash for Clunkers program are not at all different from the vehicles traded in before Cash for Clunkers. In other words, the vehicles traded in as clunkers for the $3,500 to $4,500 vouchers would have been traded in at some point anyway - government program or not.

The Ford Explorer and Ford F-150 were No. 1 and No. 2 on the trade-in list before Cash for Clunkers as well as during the program. That's not surprising since in the 1990s the pair were the best-selling SUV and the best-selling full-size pickup truck -- as well as at the top of the overall best-sellers list. In other words, a lot of them are out there ready to be traded in.

The rest of the pre and during Cash for Clunker lists contained largely the same models as well. They include the Jeep Grand Cherokee and Cherokee, Chevrolet Blazer, Dodge Ram pickup, Chevrolet Silverado pickup and Ford Windstar minivan. Only the order was slightly different. Again, all were big volume sellers in the 1990s.

The only differences in the before and after Cash for Clunker trades lists were the Chrysler Town and Country and Dodge Grand Caravan minivans, which ranked No. 9 and No. 10 on the pre clunker trade-in list. They didn't make the during Cash for Clunkers list. They were replaced by two large sedans, the Cadillac DeVille and Mercury Grand Marquis, respectively.

By category, the top five segments for clunker trade-ins before and during the government's program were identical: midsize SUV, full-size pickup, minivans, full-size SUVs and premium luxury vehicles -- in that order. 

What Clunker Traders Bought

However, the data shows the vehicles purchased to replace the clunkers turned in under the government's CARS program were different from those that would have been purchased without the clunker reimbursement. Most notably, they were more apt to be cars and they were vehicles that delivered much better fuel economy.

Before CARS, the top two vehicles purchased after trade-ins were the Ford F-150 and Chevrolet Silverado 1500 pickup trucks. The top 10 list was rounded out by SUVs, crossovers, minivans, trucks and only two cars. Specifically, in order, the F-150 and Silverado were followed by the Ford Escape, Dodge Ram Pickup 1500, Ford Edge, Honda Odyssey, Chevrolet Traverse, Toyota Tacoma, Toyota Camry and Ford Fusion.

By comparison, of the top 10 vehicles purchased to replace a clunker in the government's program, six were cars. The rest of the list includes a couple crossovers and two pickups. Specifically, the Ford Escape topped Edmunds.com's list of vehicles bought to replace clunker trade-ins, followed by the Ford Focus, Jeep Patriot, Dodge Caliber, Ford F-150, Honda Civic, Chevrolet Silverado 1500, Chevrolet Cobalt, Toyota Corolla, Ford Fusion.

The government has issued a list of cars that were purchased after trading in a clunker. The Ford Focus heads the top 10 car list followed by: Honda Civic; Toyota Corolla; Toyota Prius; Ford Escape; Toyota Camry; Dodge Caliber; Hyundai Elantra; Honda Fit; and Chevrolet Cobalt.

What It Means for Fuel Savings

In any situation, a consumer trading in a vehicle on a new one, under the CARS program or not, purchase a more fuel-efficient one. In part, that's because newer vehicles are more fuel efficient to begin with. But during the Cash for Clunkers frenzy, consumers opted for even higher fuel savings through the clunker program.

The average fuel-economy improvement when people traded in their clunker-eligible vehicle for a new one before Cash for Clunkers was 5.1 miles per gallon, from 16.1 mpg to 21.2 mpg. The improvement increased to 8.2 miles per gallon, from 16.1 mpg to 24.3 mpg, better when the vehicle was traded under the Cash for Clunkers program.

Even more dramatic, is the mileage improvement of all trade-ins, not just clunker-eligible ones. Before the program, the average mileage improvement of trade-ins of all sorts to new vehicles was a mere 1.6 mpg.

It's unlikely consumers were acting solely out of environmental consciousness. Rather they were continuing a trend seen throughout this auto sales downturn of the past year -- they were shopping for value.

Clunker traders appear budget conscious. They kept their clunkers for a long time to wring out every mile they could while putting off having a monthly car payment. Once they were drawn into the showroom to trade, they were shopping for the lowest monthly payment, which comes on a small car, and low cost of ownership, including smaller gas bills. Dealers and manufacturers also were heavily promoting fuel-efficient vehicles.

It's Contagious

An intriguing rub-off effect occurred during the Cash for Clunkers program onto people who did not participate directly.

Consumers who bought new vehicles in the last week of July regardless of trade-ins -- clunker or not -- tended to opt for smaller, more fuel-efficient vehicles.

The names of vehicles on the top 10 most purchased vehicles before and during the Cash for Clunkers were largely the same, with the Ford F-150 heading both lists. However, beneath that, the smaller Fords, Hondas and Toyotas moved ahead of their midsize counterparts.

The during Cash for Clunker list of purchases were dominated by Ford and Honda, with two Toyota models and a Chevy truck rounding out the list. -- By Michelle Krebs

Photo by Thomas Migaki

Graphics by Mark Takahashi

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.