According to a study from Texas A&M University, the Car Allowance Rebate System Act cost taxpayers $3 billion. The program, otherwise known as ‘Cash for Clunkers,’ gave individuals who traded in older cars $4,500 in cash towards a more fuel-efficient model. Over 700,000 vehicles were traded in during the program but while it was intended to boost auto sales the researchers found that it actually negatively impacted the auto industry.
“Texas A&M researchers found that Cash for Clunkers strikingly reduced overall spending on new vehicles as consumers tended to purchase less expensive and smaller vehicles… On average, buyers spent an average of $4,600 less on a new vehicle than they otherwise would have.”