An immediate benefit of the program was an increase in jobs in the auto industry, which at the time, were closing down factories left and right. For example, General Motors announced a rehire of more than 1,300 workers. Additionally, automakers were paying overtime to boost production as the demand increased. Another benefit was increased sales revenue for American companies. As more jobs were created in the auto industry, there was more money in the hands of the consumers. Spending increased slightly, which in turn gave a small boost to the rest of the economy. The immediate effects of the program put a patch on a broken economy. Auto sales contributed heavily in the economy’s recovery in the third quarter by increasing the nation’s gross domestic product by 1.7%. Additionally, 41% of cars sold were American made. In addition to the bump in domestic performance it also affected foreign countries. Foreign companies have assembly plants in the United States as well as overseas. Not only did this benefit U.S. companies, this also allowed employees who worked for Toyota, Honda, and other top foreign automobile companies to gain work as well. This in turn generated production from other American companies, such as part manufacturers, transportation companies, and other auto industry dependents. Cash For Cars Sydney
On the contrary, the CARS program may have hurt the American economy. An article that was published by Edmunds.com stated that there were roughly 700,000 new vehicles sold under the program. Based on the study that was done, only 125,000 of those were vehicles that would not have been sold anyways. When you take into consideration the average rebate being close to $4,000 and the government running up a bill for almost 3 billion, the math doesn’t add up. If you do the numbers the government spent about $24,000 per addition vehicle that would not have been sold otherwise.
Another alternative way to look at the negative repercussions is the effect on the dealership service, all of the mom and pop auto repair shops, and the replacement parts manufacturers. The U.S. auto repair shop industry is made up of over 170,000 establishments, with annual revenue of over $90 billion. By taking 700,000 cars off the streets that could potentially need repair in the next 1 to 5 years does this also negatively affect the economy? Over 70% of auto repairs are done on cars that are out of warranty. Of that 70% of the service is on the mechanical aspect of the car (transmissions, brakes, routine oil changes, etc.) and the other 30% of the maintenance is done on the cosmetics of the car (interior and exterior).