Michael J. Golde

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

I am not sure I understand the math in the article, but I do think it is fair to say the some reasonable percentage of the people who will receive rebates would have otherwise bought a new car without the rebate. Therefore, the only real benefit of the program is the incremental number of cars sold than would have otherwise been sold without the rebates. Maybe, as another posted suggested, that is how the figure of 22,000 new cars was derived or $45K+ per those vehicles.

The program is also obviously speeding up temporarily the car buying cycle. The program is obviously intended to get people to buy new cars now as opposed to the future. But, what happens when the incentives are gone? Future months could easily show a decline in sales because some of the sales that are occurring now, will take away from sales in the future.

The danger of a program of this sort is that it doesn't really create a sustainable growth model. And the worst thing would be if the automakers ramped up for potential demand that doesn't materialize because the government "juiced' sales now.