If you are considering trading in a car, carefully examine the gas cost savings as well as the voucher. Gas savings are better seen using "Gallons per Hundred Miles" (GPHM) than using MPG. In the table below, note that a 14 to 25 MPG trade in saves 3 gallons of gas every 100 miles, or 300 gallons every 10,000 miles. That's about $3,500 in savings in just 40,000 miles of driving. This post gives you multiple tools for calculating the gas savings of a trade in. The value of the gas savings can be as large as the value of the voucher.
The idea has been adopted by USA Today but only partially by the EPA. The fueleconomy.gov site (run by the EPA and DOE) offers g/100m... if you know to look for it. Unfortunately, most of the site dances around gas consumption and never lands on it squarely. For example, the site has a good gas payback calculator here:
But, the calculator doesn't tell you your gas consumption.
You have the option to pick gallons per 100 miles when selecting and comparing specific cars here: http://www.fueleconomy.gov/feg/sbs.htm ....if you know where to look (it moves around across different pages). However, nothing on the site explains why you'd want to switch to g/100m.
Senators Feinstein, Snowe, and Schumer have proposed a Cash for Clunkers bill in response to the House compromise of May 5. Full details of the Senate bill are at the end of this post.
Here's a summary from a "GPHM" perspective:
This is a much stronger plan than the House compromise in terms of CO2reductions. It is stronger for two reasons.
Second, the system is more tiered than the House bill, encouraging drivers to seek higherlevels of gas savings, but giving them the option to choose any levelthey wish above a responsible minimum.
I think the new bill does a decent job of setting a minimum (closer between 1 and 2 GPHM) and providing tiered incentives for larger reductions in GPHM.Here's how the new trade ins compareon gphm (voucher value in parentheses):
Cars
17 to 24 saves 1.7 gphm ($2500)
17 to 27 saves 2.2 gphm ($3500)
17 to 30 saves 2.5 gphm ($4500)
Light trucks
17 to 20 saves .8 gphm ($2500)
17 to 23 saves 1.5 gphm ($3500)
17 to 26 saves 2 gphm ($4500)
Large light duty trucks *
(*This category has no maximum mpg for the old vehicle and simply requires that the new truck meet a minimum of 17 mpg. I picked a high starting mpg value for the old car, 16, to make this a more conservative test of gphm savings. A lower mpg value on the old vehicle would yield substantially greater gphm savings for the same mpg increments of 3, 5, and 7.)
16 to 19 saves 1.0 gphm ($2500)
16 to 21 saves 1.5 gphm ($3500)
16 to 23 saves 1.9 gphm ($4500)
The only increase that seems too small is the 17 to 20 mpg gain on lighttrucks, yielding less than 1 gallon saved per 100 miles.
This is where the MPG Illusion and the use of GPM is critical. Manypeople might think that the MPG increases on the Large Light Duty Trucks are unimpressive--starting at 14 and then moving to 17, 19, and 21. Butthose gas savings are greater than the savings produced by larger MPGincreases on the Light Trucks (from 17 to 20, 23, and 26).
The night and day difference between this Senate bill and the House bill is the requirements forLarge Light Duty Trucks. This bill is fairly responsible in thatcategory.
Here's a cut and paste of the May 19 fact sheet:
The revised “Cash for Clunkers” proposal introduced today would ensure that vehicles purchased under the program do not bring down the fleetwide averages that the Ten in Ten Fuel Economy Act intended to raise.
Feinstein-Collins-Schumer Counter Proposal
Passenger Cars
Light Duty Trucks
Large Light Duty Trucks (6000-8500 pounds)
Work Trucks (8500 to 10,000 pounds)
Minimum Fuel economy for purchased vehicle
24 mpg
20
17
n/a
$2,500 for new vehicle purchase, $1,000 for used vehicle purchase, 2004 model year or later
Mileage improvement of at least 7 mpg
Mileage improvement of at least 3 mpg
Mileage improvement of at least 3 mpg
Trade-in work truck must be pre-1999 model (used cars not included)
$3,500 voucher for new vehicle purchase
Mileage improvement of at least 10 mpg
Mileage improvement of at least 6 mpg
Mileage improvement of at least 5 mpg
n/a
$4,500 voucher for new vehicle purchase
Mileage improvement of at least 13 mpg
Mileage improvement of at least 9 mpg
Mileage improvement of at least 7 mpg
n/a
Trade-in vehicles must be 17 mpg or below. All fuel economy values are EPA combined city/highway fuel economy, as posted on the window sticker of new cars.
Details of Feinstein-Collins-Schumer Counter Proposal
Consumers may trade in their gas-guzzling vehicles to be scrapped – with a fuel economy of less than 17 miles per gallon – and receive vouchers worth up to $4,500 to help pay for the purchase of more fuel efficient cars and trucks. The program will be authorized for up to one year and provide for approximately one million new car or truck purchases. There are approximately 27 million vehicles on the road today that could qualify for trade-in under this program.
This proposal is consistent with the framework of the House compromise legislation, and divides the cars and trucks that would be purchased with the incentive voucher into four categories. Miles per gallon figures below refer to EPA “window sticker” values.
· Passenger Cars: The trade-in vehicle must get 17 miles per gallon (mpg) or less. New passenger cars with mileage of at least 24 mpg – the current average for this vehicle class – are eligible for vouchers.
o If the mileage of the new car is at least 7 mpg higher than the old vehicle, the voucher will be worth $2,500 for a new car purchase.
o If the mileage of the new car is at least 10 mpg higher than the old vehicle, the voucher will be worth $3,500.
o If the mileage of the new car is at least 13 mpg higher than the old vehicle, the voucher will be worth $4,500.
o The purchase of a used passenger car with a mileage of at least 24 mpg would qualify for a voucher of $1,000.
· Light-Duty Trucks: The trade-in vehicle must get 17 miles per gallon (mpg) or less. New light trucks, minivans or SUVs with mileage of at least 20 mpg – the current average for this vehicle class – are eligible for vouchers.
o If the mileage of the newly purchased truck or SUV is at least 3 mpg higher than the old truck, the voucher will be worth $2,500 for a new vehicle purchase.
o If the mileage of the newly purchased truck or SUV is at least 6 mpg higher than the old truck, the voucher will be worth $3,500.
o If the mileage of the newly purchased truck or SUV is at least 9 mpg higher than the old truck, the voucher will be worth $4,500.
o The purchase of a used light-duty truck or SUV with a mileage of at least 20 mpg would qualify for a voucher of $1,000.
· Large Light-Duty Trucks: Newly purchased large trucks (pick-up trucks and vans weighing between 6,000 and 8,500 pounds) with mileage of at least 17 mpg – the current size-adjusted Corporate Average Fuel Economy Standard for the largest pickup trucks – are eligible for vouchers.
o If the mileage of the newly purchased truck is at least 3 mpg higher than the old truck, the voucher will be worth $2,500.
o If the mileage of the newly purchased truck is at least 5 mpg higher than the old truck, the voucher will be worth $3,500.
o If the mileage of the newly purchased truck is at least 7 mpg higher than the old truck, the voucher will be worth $4,500.
o The purchase of a used large light-duty truck with a mileage of at least 17 mpg and 3 miles per gallon higher than the trade-in vehicle would qualify for a voucher of $1,000.
· Work Trucks: Under the proposal, consumers can trade in a pre-1999 work truck (defined as a pick-up truck or cargo van weighing from 8,500-10,000 pounds) and receive a voucher worth $2,500 for a new work truck in the same or smaller weight class. There will be a limit on these vouchers, based on this vehicle class’s market share. There are no EPA mileage measures for these trucks; however, because newer models are cleaner than older models, the age requirement ensures that the trade will improve air quality. Consumers can also “trade down,” receiving a $2,500 voucher for trading in an older work truck and purchasing a smaller light-duty truck weighing from 6,000 – 8,500 pounds.
Jason Bordoff of the Brookings Institution recently made the case for a Cash for Clunkers program in a Detroit Free Press Column and a Brookings Institution Paper, as did Dean Baker of CEPR at Truthout. Alan Blinder proposed a Cash for Clunkers program in July 2008 and reviews similar programs that have been implemented in several states.
GPM makes clear why this is a brilliant idea--the gas savings and CO2 reduction of removing a 14 MPG for a 25 MPG car is huge (3 tons of carbon dioxide over 10,000 miles). There is no possible improvement that can be made to a 33 MPG to reduce carbon emissions by that amount. And, of course, it is a way of stimulating car purchases during the current economic crisis.
25 MPG doesn't seem like much. But removing the 14 MPG cars is extremely valuable, and as important today as winning the X prize with a 100 MPG car tomorrow.....
The math:
14 MPG = 700 gallons per 10,000 miles 25 MPG = 400 gallons per 10,000 miles 33 MPG = 300 gallons per 10,000 miles
The 14 MPG to 25 MPG improvement eliminates 300 gallons per 10,000 miles, or 3 tons of carbon dioxide.
The net carbon impact of Cash for Clunkers must also take into account CO2 emissions from car production. Honda emits less than a ton of carbon dioxide to produce each vehicle. Based on Honda's numbers, replacing a 14 MPG car with a new 25 MPG car would be carbon neutral after 4,000 miles of driving, and would represent a net carbon reduction after that. (Update: More on the carbon consequences of new cars at this later post.)
Eric De Place at Sightline Daily endorses the idea.
There are a few moral hazard issues with this proposal that I'll let the economists sort out (i.e., junkers sitting in a yard are fixed up to make a couple of thousand dollars, but the car is worth less than the bounty, and removing it yields no carbon reduction). The proposal addresses this issue by requiring that the car be registered in the previous 120 days.
G/100M is one of the 25 Bold Ideas.
