The Car Allowance Rebate System, known colloquially as Cash For Clunkers, was largely intended to stimulate the economy in a post-recession America, though the Obama administration billed it as a way to reduce automobile emissions and increase traffic safety by pushing consumers to trade their old gas-guzzlers for new cars. The CARS program offered $4,500 to Americans who would trade in their cars with a combined fuel economy number under 18 for a new car with a higher number than 28. The rebate was in extremely high demand. The incentive program was expected to last from July through November, but ran out of funds within a month of launching.
For some unknown fucking reason, there seems to be a groundswell of support for the thought that CARS is to blame for the dearth of inexpensive cars available on the used market in 2025. The average used car transaction price in 2024 was around $28,000, which is certainly expensive, but I promise “Cash For Clunkers” had nothing to do with it. And in the case of the above tweet, it’s important to note that Saskatchewan is not in the United States.
Let’s take a moment to look back at CARS and what effect it might have on the current used car market. In order to be eligible for scrapping under the CARS program, your trade-in had to be no more than 25 years old, had to be functional and on the road for at least a year before trade-in. We’re not talking about Hemi ‘Cudas here. The vast majority of cars traded in on the program were 15-year-old trucks and SUVs like Ford Explorers and F-150s, Jeep Cherokees and Grand Cherokees, Chevy Blazers and GMT400 half-ton pickups. The vast majority of those trade-ins were made in order to get a small economical sedan or hatchback, so Honda Accords, Civics and Fits, or Toyota Priuses, Corollas and Camrys.
So how many cars are we talking about here? For it to have an effect on used car prices in 2025 it must have been millions, right? To have a sixteen-year effect on the American used car market, which sees around 40 million cars change hands per year in the U.S., this program must have cost trillions and incentivized Americans to scrap hundreds of millions of used cars, right? It was approximately 680,000 cars. That’s it. Around one week’s supply of used cars were removed from the market around the time a newly licensed driver in 2025 was born.
After Chrysler and General Motors filed bankruptcy in early 2009 things were looking dire for American automakers, and the whole market needed a big shot in the arm to keep going. The program pushed American consumers to buy new cars at a time when they were uncertain about the economy as a whole. Statistically it was probably not super effective at growing the economy or reducing emissions, and both automakers needed federal bailouts regardless, but it was a popular program that more or less did what it set out to do.
Since the program was shut down in August of 2009, Americans have bought an estimated 231.25 million brand new light-duty cars, trucks, and SUVs. The ones that don’t get crashed or preserved get sold on the used car market. The average car on the road in the U.S. today is nearly 13 years old, so presumably there aren’t even many of those brand new fuel-sippers bought during the Cash For Clunkers era left on the road, let alone the so-called clunkers which were scrapped to buy them.
Look, buying a used car isn’t cheap in 2025, but that’s largely because buying a new car is significantly more expensive today as well. Inflation is a real sonofabitch, because the 1990s junker you could buy in 2009 and drive for a few years until it left you stranded on the side of the road was maybe $3,000 and you might be able to fix it yourself. Today a $3,000 car has catastrophic electrical issues that send it to the scrap before it gets to the used car dealership.
Americans quit buying cheap and cheerful basic cars, and the knock-on effect has been more expensive used cars. There’s nothing on the new market for under $20,000, so why should you expect used cars to maintain the same prices as they were 16 years ago? Remember when there was a new car shortage, a chip shortage, and logistics issues during a global pandemic a couple of years ago? I’m inclined to believe that the events of 2020 contributed much more to the used car crisis we’re facing today than anything that happened while Obama was president.
Cash For Clunkers was not a great program, and the short-term costs of used cars definitely went up as a result, but any effect the program had on the local used car market ended well before Donald Trump’s first election, when he floated the idea of bringing it back.