Most reports tout the Cash for Clunkers programs as a runaway success.
In fact, about 250,000 C4C deals were transacted in a week or two – fully utilizing the budgeted $1 billion – at an average rebate of about $4,000.
But …
Marketing promotions should always be evaluated on an incremental basis. That is, how many sales were induced over and above what would have happened any way.
Car authority J.D. Power and Associates thinks that most of the cars purchased through the C4C program were simply sales that would have happened this year but were pulled ahead a few months. The company thinks that as few as 20% of the cars bought in the program are really new sales to the market. That means that as many as 80% of the cars would have been sold this year anyway. Edmunds.com, which tracks vehicles pricing and buying data, agrees. They say: “when the public thought that the program would cease after the first billion dollars was spent, they rushed to dealerships.By Aug. 20, we could be back to pre-clunker sales levels.”
So what ?
Well, from a marketing analysis perspective, the full cost of a program should be assigned to the incremental sales. So, the $1 trillion should be allocated across 50,000 incremental car sales (20% times 250,000). That’s about $20,000 per incremental sale.
Recast, phase 1 of C4C took 250,000 clunkers off the road by, in effect, giving away 50,000 new, more fuel efficient cars.
Worth it?
You decide.
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See Business Week, Cash for Clunker Interest Slows, August 14, 2009
http://www.businessweek.com/autos/autobeat/archives/2009/08/cash_for_clunke_10.html
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The Homa Files 
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