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NADA Blasts Web Analysis of Clunkers as Flawed

Economist says clunker cost per vehicle is $4,600 not $24,000.

by on Nov.11, 2009

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The analysis is wrong on two main points, Taylor says.

After what is said to be a “thorough review” of the Cash for Clunkers program, the chief economist of the National Automobile Dealers Association (NADA), Dr. Paul Taylor, says that the cost of each incremental vehicle sold was around $4,587. Taylor defined incremental as a sale that would not otherwise have occurred without the Clunkers program, formally known as CARS.

His findings bring into serious question the methodology — and ideology– behind the $24,000 estimate publicized by the car-buying web site Edmunds.com.

“It’s really not that hard to determine a credible cost estimate for the Clunkers program,” says Taylor.

“You subtract projected sales from actual sales for July and August when the Clunkers program was operating, and divide the program’s $3 billion by that number.”

Taylor says that, based on sales volume for previous months, a realistic projection of auto sales for July and August would be around 1,600,000 vehicles. Actual sales for those two months totaled 2,253,963. The difference is 653,963. That is the number of incremental sales generated by the Clunkers program. Divide the program’s $3 billion by that number and you get $4,587, the average cost per incremental Clunker sale.

Taylor’s criticism mirrors that of many others, including Mike Jackson, chairman and CEO of AutoNation, Inc, the biggest auto retailer in the U.S.

(more…)