Ramblings of a Jackhole

Did anyone run the numbers on Cash For Clunkers?

An average Cash for Clunkers vehicle received 15 mpg. At 12,000 miles per year that’s 800 gallons a year of gasoline.

An average replacement vehicle receives 25 mpg. At12,000 miles per year uses 480 gallons a year.

Therefore, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year per clunker.

The President and Congress tells us that 700,000 “clunkers” were taken off of the road under this program. So that’s a TOTAL savings of 224 million gallons / year.  Wow.  224 million.  BIG NUMBER.

Now, on average, a barrel of oil can be refined down to 19.5 gallons of gasoline. That equates to a bit over 11.5 million barrels of oil. Wow, yet another BIG number?

Well, the annual oil consumption in the US is about 7.5 BILLION barrels of oil. So “Cash for Clunkers” will decrease our annual oil usage by 0.16%, our about half a day of the total US oil consumption every year.

Still, we all must care about foreign dependency and even this savings should be desirable right?

Sure, but at what cost? Let us see.

From the buyers perspective, the current nationwide average price for a gallon of gas is just under $2.50. That means the average clunker owners will save $800 a year in gas costs.  The National Automobile Dealers Association tells us the average cost of a new car is $28,400.  J.D. Power tells us that the average auto loan is for 64 months (five years, four months).  Bankrate.com shows the average interest rate to be over 8%.  That means the average clunker buyer will be spending over $6500 in interest for their loan (over $1300 a year).  The AAA estimates the average depreciation of a vehicle around $3400 a year, or $17,000 in five years.  That means that after five years the average “cash for clunkers” buyer spent over $23,500 to save $4000, for a loss of $18,500. Even if gas goes to $5.00 a gallon they will have lost over $15,000 in five years. And we’re encouraging our citizens to do this?  Why would we even think about it?  Won’t this just make them MORE dependent on government hand outs?  Would the President and Congress ever really WANT that?  Hmmmm….

Well, the President and Congress thought it was a good idea to spend $3 billion to decrease the annual need of 11.5 million barrels of oil, which costs $775 million at today’s rates.  One might argue at we’ll “break even” after five years, but that is ignoring the fact that even without cash for clunkers US consumers will eventually trade in their cars for more efficient ones.  All the “Cash for Clunkers” program did was to speed this process up by a year or two at the most.  Even if this sped up the trade-in rates by TWO years, the $3 BILLION would prevent the buying of less than $1.5 BILLION over the two years.  And that isn’t money that the government would have spent, but oil companies.

How is investing in a program that encourages citizens to go into debt and come out behind a good idea?  How is spending $3 billion on reducing consumption by less the 1/700th of our use a good idea?

And they wonder why we don’t trust them with our health care spending…