Introduction

The Car Allowance Rebate System (CARS) or “cash for clunkers” launched during the height of the recession, was a $3 billion U.S. federal scrappage program, which officially started on July 1, 2009, processing of claims began July 24, and the program ended on August 24, as the appropriated funds were exhausted. The program was intended to provide economic incentives to U.S. residents to purchase a new, more fuel-efficient vehicle when trading in a less fuel-efficient vehicle. The program was promoted as providing stimulus to the economy by boosting auto sales, while putting safer, cleaner, and more fuel-efficient vehicles on the roadways.

NAtional Highway Traffic Satety Administration made the paid transaction databases, which contain the transaction level information for the 676,984 CARS transactions, the cancelled transaction databases (contain 16,922 CARS transactions) and 143998 consumer surveys available on its website.

Compare the Performance of the Program for All States

Fuel Efficiency Improvement

One major purpose of the program is to get more fuel-efficient vehicles on the road. According to the transaction records, the average mpg of the trade-in vehicles was 15.81 and that of the new vehicles purchased was 24.97, which means the fuel efficiency was improved by 57.94% overall. The state with the biggest fuel efficiency improvement was Utah (66.23%) and the state with the smallest fuel efficiency improvement was Louisiana (51.26%).

Percentage of Fuel Efficiency Improvement by State

The Top 10 States with Most Fuel Efficiency Improvement
State Fuel Efficiency Improvement
Utah 66.23
California 66.03
Oregon 65.09
Colorado 64.67
Montana 64.27
Arizona 63.82
Washington 63.29
Nevada 63.02
New Mexico 61.53
Idaho 61.07
The Top 10 States with Least Fuel Efficiency Improvement
State Fuel Efficiency Improvement
Louisiana 51.26
Michigan 53.51
Mississippi 53.67
Alaska 54.45
Alabama 54.73
Arkansas 55.74
Nebraska 55.84
Delaware 55.85
Hawaii 56.11
South Dakota 56.15

Approved Voucher Amount

As a $3 billion U.S. federal scrappage program, the amount of vouchers got approved for each state was unevenly distributed. California – the most successful state in terms of the amount of voucher approved – got over 321 million dollars itself, which accounted for over 10% of the total amount, while DC only got less than 100 thousand dollors in total.

Total Voucher Amount (in million) by State

The Top 10 States with Highest Amount of Voucher Approved
State Total Voucher Amount (Million)
California 321.55
Texas 179.58
New York 153.61
Florida 143.56
Illinois 141.12
Pennsylvania 137.54
Ohio 134.37
Michigan 129.14
New Jersey 101.94
Virginia 98.60
The Top 10 States with Lowest Amount of Voucher Approved
State Total Voucher Amount (Million)
District of Columbia 0.07
Wyoming 2.38
Alaska 4.73
Montana 6.19
Hawaii 7.18
North Dakota 8.75
Vermont 9.67
South Dakota 10.15
Rhode Island 10.53
Delaware 11.09

Approved Voucher Amount per Capita

States like California, Texas and New York received more in total voucher amounts because of their larger populations, whereas New Hampshire and Vermont received the greatest per capita voucher amount (both above $15 per capita).

Voucher Amount per Capita by State

The Top 10 States with Highest Amount of Voucher Approved per Capita
State Voucher Amount per Capita (dollar)
New Hampshire 17.15
Vermont 15.45
Minnesota 13.55
Michigan 13.07
North Dakota 13.02
Maryland 12.80
South Dakota 12.47
Delaware 12.35
Maine 12.32
Virginia 12.32
The Top 10 States with Lowest Amount of Voucher Approved per Capita
State Voucher Amount per Capita (dollar)
District of Columbia 0.11
Mississippi 4.11
Wyoming 4.23
Nevada 5.23
Hawaii 5.28
Arizona 6.00
Montana 6.26
Alabama 6.42
New Mexico 6.57
Alaska 6.66

Which state on average bought the most expensive vehicles?

The exact amount of all the transactions were undisclosed. But according to manufacturer suggested retail price (MSRP), the estimated price of vehicle purchased in DC was the highest ($25554.24).

The Top 10 States with Highest MSRP
State Average MSRP (dollar)
District of Columbia 25554.24
Wyoming 23984.86
North Dakota 23865.57
Alaska 23702.60
Nebraska 23626.96
South Dakota 23532.34
Louisiana 23422.44
Montana 23265.45
Arkansas 23159.96
New Jersey 23114.35
The Top 10 States with Lowest MSRP
State Average MSRP (dollar)
Arizona 21055.14
Utah 21399.67
Nevada 21552.61
West Virginia 21570.33
Florida 21611.27
Hawaii 21639.21
Oregon 21704.62
Maine 21819.37
Rhode Island 21863.88
Ohio 21962.03

Did West Coast consumers purchase more fuel efficient cars than consumers in other regions?

If you happen to live on the West Coast and came across the U.S. Energy Information Administration (EIA) Website, you will see how much more you’ve been paying for gas than any other regions in the United States. Did West Coast consumers purchase more fuel efficient cars than consumers in other regions because of the higher gas price and everything?

U.S. Regular Gasoline Prices
Region Price (04/20/15) Price (07/06/09)
U.S. 2.485 2.726
East Coast 2.443 2.605
Midwest 2.397 2.547
Gulf Coast 2.242 2.460
Rocky Mountain 2.427 2.591
West Coast 2.968 2.886 


    Wilcoxon rank sum test with continuity correction

data:  paid.db.no.zero.mile$new_vehicle_car_mileage by paid.db.no.zero.mile$West_Coast
W = 24521512572, p-value < 2.2e-16
alternative hypothesis: true location shift is not equal to 0

The box plots and the ecdf’s above could suggest a difference of the gas price between west coast and the other regions in US. And taking from the result of the Mann-Whitney U test, the two-tailed p-value is less than \(2.2 \times 10^{-16}\). Set the significance level \(\alpha = 0.05\), the p-value is far less than \(\alpha\). So the result would be considered statistically significant and the null hypothesis of the test(The distributions of New Vehicle Mileage of the West Coast and New Vehicle Mileage of other regions are the same) should be rejected and concluded that the mileage of the new vehicles pursed on the West Coast is statistically higher than the other regions. In other words, West Coast consumers purchased more fuel efficient cars than consumers in other regions.

Behavior Patterns of Consumers

1.Buying less American Vehicles

85.2% of the trade-in vehicles were American, but the number dropped to 38.09% of all the new puchased vehicles. Japanese cars took the dominant place in passenger car sales. And the sale for “category 1 truck” was slightly higher for the American manufactures than their Japanese counterpart. But American manufactures still took the lead on the sales of ‘category 2’ and ‘catgory 3’ trucks.

Takeaway: American Manufactures still stand strong in terms of the sales of trucks. But they need to watch out their Asian competitors on the fuel-efficient passenger cars.

2.The Higher Value of the Voucher the Better - Buyers went for it

The previous owners of “passenger car”, “category 1 truck” and “category 2 truck” were more willing to buy vehicles provided higher amount of voucher, while previous “category 3 truck” owner preferred to buy category 2 and 3 trucks even if it means they got voucher of lower value.
Takeaway: For all the dealers, give a better deal to the cars you want to sell most. You’ll see the result!

3. Many Truck Drivers Switched to Passenger Cars

Many participants traded in their old trucks and bought passenger cars instead.
Takeaway: The trade-in program may attract more consumers who want to change the type of their vehicles (say trade in truck for passenger car) than those who only want a newer or better same type of car.

Is ‘C.A.R.S.’ Program ‘wildly successful’ as the Goverment Declared?

According to 143998 cosumer surveys, 88.21% of the participants of the program won’t have purchased a new or used vehicle during the period of the program without the incentive(55 days started from July 24, 2009). For those participants who did plan to buy a vehicle, the program borrowed the sales that would have occured on average 2.87 years later, which was helpful since U.S. economy was struggling at that time.

But the program led to a gain in market share for Japanese and Korean manufacturers at the expense of American car makers. 85.2% of the trade-in were of American brand and only 38.09% of the new purchased were from American car maker, another 46.26% and 11.57% went to Japanese and South Korean manufacturers, seperately.

But the program definitely put many greener, safer, more fuel-efficient cars on the road in a short period.

But to verify the claims on market impact of C.A.R.S and fiscal stimulus the program provided, we need to collect more data on the long-run automobile sales in U.S. and the unemployment rate and jobs created in the automobile industry. And more importantly, a economist.

Reference