I hate to see old cars die. They represent the efforts of so many people—designers and engineers, mechanics, accountants, miners, and myriad others. And a car is such a personal object, perhaps it is one of the most personal objects we own. They are the second most expensive thing most people will ever purchase. Even the people who shop for a car just because they need a basic transportation device usually look at a few before settling on the right vehicle. Heck, how many times have you heard someone speak wistfully of that "new car smell" even though turpentines and long-chain polymers are rarely at the top of our favorite olfactory sensations list? (Oh, and what an entertaining list that is.)
With this in mind, my initial opinions of any car scrapping program like CARS (aka Cash for Clunkers) tend to be a bit dim. Generally, the thought of destroying things makes me uneasy. I’m always a bit sad when a building is torn down. It’s kind of like celebrity gossip: Some people are made happy when some celebrity destroys themselves. I don’t want to see it, though.
But I want to know whether I think that the CARS program is a good or bad idea. Perhaps by the end of this article there will be an answer, though I suspect not. This is a very complex issue that includes concepts such as well-to-wheel efficiency, lifecycles, oil, social behavior, and who knows what else. I’m going to try to break this analysis down into categories.
Overview of Cash for Clunkers
So that we’re all on the same page, here are the basic rules to get the CARS rebate:
1. Your exchanged vehicle must be less than 25 years old
2. Your exchanged vehicle must get 18 mpg or less according to current NHTSA data
3. The new car must get a minimum of four more miles per gallon than their old vehicle to qualify for the $3,500 rebate, and 10 more miles per gallon to qualify for the $4,500 rebate, though allowances differ for trucks and SUVs.
4. Your old car will be destroyed by a salvage yard.
5. The salvage yard must destroy the engine using sodium silicate, and may not resell any parts of the drivetrain including accessories, catalytic converters, mufflers, etc.
6. The salvage yard may resell some parts such as turn signals, sun visors, and other non-drivetrain parts.
Lifecycle Pt. I – Fuelin’ Up
The first issue is the lifecycle of the car being destroyed and whether this is an environmentally sound decision. A lot of energy and oil went into producing the old car in the first place and it is possible that the car has not yet met its potential lifecycle. In other words, if the car is capable of running for 250,000 miles and it gets destroyed in 80,000 (a reasonable estimate1, but no actual numbers are available), is that a waste of energy and oil? But wait, you say, the new car is more fuel efficient. True, but the question is whether that mpg difference makes up for the lost viability of the old vehicle.
To determine this, we need to look at the differences between what’s being taken off the road, and what people are buying. According to the stats (which I found here) the average fuel economy of the new vehicles is 25.3 mpg and the old vehicles is 15.8 mpg.
Using those same estimates, the number of gallons of fuel used over the expected and curtailed lifecycles of the clunker are:
250,000 mi. lifecycle fuel use: 15,822.8 ga.
80,000 mi. shortened lifecycle fuel use: 5,063.3 ga.
Now, let’s look at the total lifecycle for the new car:
250,000 mi. lifecycle fuel use: 9,881.3 ga.
Combining those figures together we get a total difference of:
80,000 mi. clunker fuel (5,063.3) + 170,000 mi. new vehicle use2 (((250,000mi. – 80,000mi.)/25.3mpg)=6,719.4) = 11,782.67 ga.
This is a fuel savings of 4,040.13 gallons which is an improvement, but I wouldn’t call it a knock out of the park. The average fuel economy of the new vehicles being purchased is too low for this to be a major improvement. In fact, the average of 25.3 is below the CAFE standard of 27 mpg3.
Lifecycle Pt. II – Buildin’ It
The fuel economy is one thing, but the manufacture of the vehicle also needs to be considered. According to some stats4 the oil equivalent of 2,340 ga. of gasoline into the production of a new vehicle. With this additional bit of information, we can re-examine those numbers from above.
To fully recapture the energy invested in building the car in the first place, the car needs to run out its lifecycle. But, since we are curtailing this, we are only using 32% of the initial energy investment (748.8 ga.). This means we are throwing away 1,591.2 ga. of gasoline5.
Now the fuel savings is reduced to 2,448.93 ga., which is not very impressive. More importantly, those 1,591.2 ga. of gas have just been wasted—it’s as if the fuel economy of the new car has been lowered to 21.8 mpg. Wow!
Lifecycle Pt. III – Crushin’ It
I can’t find any stats on how much energy goes into crushing a car, but I imagine it’s somewhere around 25 ga. of gas when transportation, crushing, etc. are all factored together. That’s an insignificant amount, so we needn’t worry about it.
However, the loss of parts is something that makes a difference. Alternators, radiators, fuel injection systems, and the like are also being destroyed. Although they can be recycled into new parts, there is a cost associated with this. Considering that these useful parts have already been manufactured and are frequently exchangeable between different types of cars (i.e., a GM truck alternator may be the same as used in a GM car) there is no good reason to let them go to waste.
The Social Factor
Does a program like this enforce the idea that vehicles are disposable goods like cell phones? While I personally believe that we shouldn’t consider anything to be simply disposable, it is certainly a bigger concern when the item is something as energy consumptive as an automobile.
One of the big differences between a cell phone and a car is that as the technology evolves cell phones become more capable and more usable. An iPhone is significantly more advanced than an old Ericsson. However, the technology in automobiles has barely advanced since the 1920s and when the technology improves the function of the vehicle is not that different. The only really useful difference between my ’00 Saab and my ’74 Fiat is that the Saab doesn’t break down as much. Outside of that, they both get me from place to place (usually…), have somewhere to put my stuff, and are fun to drive.
An upside is that people are trading in their SUVs and trucks for smaller passenger cars. Perhaps this will continue the trend toward smaller vehicles which are less wasteful in general6.
Emissions
This is a more significant win for the CARS program than the fuel economy. I don’t have the statistics available at the moment, but the trucks and SUVs being turned in produced disproportionately more pollutants than the smaller vehicles being purchased. Mainly this is due to byzantine emissions regulations that allowed trucks and SUVs to slide by with fewer emissions controls. Notably, cars like the Prius and the Fit produce cleaner air out the tailpipe than what is entering through the intake.
"Clunker" Definition
Recently, NHTSA redefined their rules for fuel economy. They then retroactively altered all of the fuel economies of cars from the past. In essence, they lowered all the figures. This is a bigger discussion than would fit here. However, some of the rejiggering of numbers have made some cars into "clunkers" if the definition is 18mpg or less.
A 1987 Saab 900, for instance, formerly got 20mpg, but now gets 18. I’d hardly call that car a clunker, and destroying something like the iconic 900 just so you can get a Corolla is, well, it’s depressing to me.
The problem is that NHTSA has always under-represented the highway fuel economy and over-represented city. The new figures err more on the side of under-representing city economy, but even more significantly under-represent highway. As an example, my Saab 9-5 Aero got 27mpg highway according to the original NHTSA figures. The new NHTSA stats place it at 25mpg. I and other Aero drivers regularly get about 31, sometimes more.
Admittedly, this also holds true for the new cars as well. But again, there is a threshold that we’re dealing with, and it might be artificially low in some instances.
Money Saved?
People weren’t buying as many cars which is why this program was created. The question is whether they should be out buying cars right now anyway. The premise is that, "Hey! You’ll save up to $4,500 on a new car!" Yay. But did they need to do that anyway?
I can’t find any statistics on the average age of most of these cars, but my guess is that they are all either mostly paid off or nearly paid off. If the vehicles are at 80,000 miles then they are, on average, 5.33 years old. So, there were no monthly payments, and no interest to pay.
From the consumer’s perspective, they are saving 4,040.13 gallons of fuel over the potential lifespan of their old vehicle. At $3.50 per gallon (a roughly estimated average for the next few years) that’s $14,140.45. That equates to a yearly savings of $1,247.407.
But, they also had either few remaining payments, or no payments at all. The average monthly payment for a new car is $581.318.
That’s $6,975.72 that they were probably not paying previously. If we factor in the fuel savings, then they are spending an extra $5,728.32 per year.
I wouldn’t call that frugal.
Random Things
There are a number of other random bits of information about this program:
1. As my friend Alex Moffett pointed out, the majority of these vehicles would have been destroyed anyway. He argues it’s a wash. However, as stated above, the energy used to manufacture the car was not fully expended since the lifecycle was curtailed. Therefore it’s not really a wash.
2. Obviously this is promoting car sales, which some say is good. Honestly, I don’t know if we should be selling as many cars a year as we had been—it seemed a bit extreme to me. I’ve always wondered how dealerships stay in business, but apparently every dealership sells about four or five cars a day.
3. Isn’t this a backwards form of corporate welfare? The money doesn’t really go to the consumer, they just get a lower price on a car they might not have otherwise purchased (hence it being a stimulus plan). From my perspective, this is the government giving the auto manufacturers about $4,2378 dollars per car they built.
4. The cars that are being purchased were already on the lot, so they’ve already been manufactured. This might make things lean a bit toward being a wash as far as production energy input is concerned.
5. As a stimulus plan, it may well stimulate people to buy more appropriate vehicles. It also might make smaller cars more fashionable again, which is good.
Overall
I still end up confused by all of this. The fuel savings are really not that great, and I’m torn on the social side of things. Smaller cars? Good. Disposable cars? Bad. Stimulating business? Good. Corporate welfare? Bad. Destroying a Saab 900? Atrocious.
Do we really need to buy new cars all the time? There are plenty of good used cars out there, and I always tell anyone that’s interested in getting a vehicle to purchase a post-lease car. Let some other schmuck take the depreciation hit for you.
I don’t see it as environmentally sound to waste the resources that went into the production of the vehicle. Really, it’s just waste, and there’s no other way about it.
Maybe I have made up my mind about this program: It’s a stimulus package that, while attempting to get us to buy something more efficient, ultimately still encourages wastefulness and needless spending.
Notes:
1 The rationale behind these figures is: Most vehicles’ warranties or leases end at 60,000 miles. At this point a car is either traded in, taken off lease, or driven less frequently. In other words, this is the point when people consider getting rid of their car—hence why I am using the figure here. Traditionally this car would go onto the used car market. The 250,000 mile range is the point when most cars are no longer worth repairing anymore, whether it is the original owner or not.
2 Admittedly, the new car will continue to run for an additional 80k miles at the improved fuel economy, but this comparison is only looking at whether destroying the old car is a worthwhile approach.
3 The CAFE requirement states that major vehicle manufacturers must produce a total average fuel economy of 27 mpg for nearly all types of passenger vehicles sold. Generally speaking, the manufacturers pad these figures with their passenger cars so that their trucks and SUVs can get away with lowerfuel economy ratings. In other words, their cars get around 30 mpg while the trucks get about 20 mpg. What’s interesting about this from a Cash for Clunkers perspective is that it means people are not necessarily buying the most fuel efficient vehicles available.
4 I am using Ruppert’s figures here because they work easily with the numbers I’m already using. However, there is a discrepancy between Ruppert and Savinar with Savinar stating 10% of lifetime use is in manufacture and Ruppert stating 12%. So, if you believe Savinar, then that makes the new car slightly more efficient. Also, in case you’re curious, Savinar’s figures of a 17 year lifecycle for vehicles matches with my 250,000 mi. lifecycle. Most stats place yearly driving at 15,000 mi., which comes out to 255,000 mi. over the span of 17 years.
5 There is no need to include the energy input for creating the new car because that car will presumably complete its full lifecycle. One might argue that the additional 170,000 miles covered will help make up for the difference. However, both of these vehicles could have been on the road under different owners (and most likely would have been).
6 For the stats on traded-in vehicles, see here. Additionally, since most vehicles are used to carry one person and one bag the majority of time, is all of that engine and suspension truly required? It’s similar to a theory about air conditioning units. Most new houses have oversized A/C units so that they can handle the hottest day or two of the year. But most of the time these units are running significantly under peak efficiency. Do we need a car year ’round that can carry our family when they come to town once at Christmas?
7 170,000 miles difference / 15,000 mile average per year = 11.33 remaining years on the old car. $14,140.45 / 11.33 = $1247.68 savings in fuel per year.
8 According to the FTC the average new car cost is $28,400. Taking out the average CARS voucher of $4,237 leaves $24,163. Using Bankrate’s calculator with a 4 year term and an average new car 7.24% interest rate gives monthly payments of $581.31.
9 Average voucher amount. See here.