This is the accessible text file for GAO report number GAO-10-486 
entitled 'Auto Industry: Lessons Learned from Cash for Clunkers 
Program' which was released on April 29, 2010. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as 
part of a longer term project to improve GAO products' accessibility. 
Every attempt has been made to maintain the structural and data 
integrity of the original printed product. Accessibility features, 
such as text descriptions of tables, consecutively numbered footnotes 
placed at the end of the file, and the text of agency comment letters, 
are provided but may not exactly duplicate the presentation or format 
of the printed version. The portable document format (PDF) file is an 
exact electronic replica of the printed version. We welcome your 
feedback. Please E-mail your comments regarding the contents or 
accessibility features of this document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

April 2010: 

Auto Industry: 

Lessons Learned from Cash for Clunkers Program: 

GAO-10-486: 

GAO Highlights: 

Highlights of GAO-10-486, a report to congressional committees. 

Why GAO Did This Study: 

In July and August 2009, the federal government implemented the 
Consumer Assistance to Recycle and Save (CARS) program, or “Cash for 
Clunkers,” a temporary vehicle retirement program that offered 
consumers a monetary credit ($3,500 or $4,500) to trade in an older 
vehicle for a new, more fuel-efficient one. The National Highway 
Traffic Safety Administration (NHTSA) was responsible for 
administering the program, and GAO was required to review the program’
s administration. This report examines (1) what is known to date about 
the extent to which the CARS program achieved its objectives; (2) what 
stakeholders’ experiences were with the CARS program; and (3) how the 
CARS program compares to other selected domestic and international 
vehicle retirement programs. 

To address these issues, GAO reviewed the CARS legislation and 
implementing regulations, a required NHTSA report to Congress on the 
program’s efficacy, and CARS program transaction data. GAO also 
contacted officials from NHTSA and the Environmental Protection Agency 
(EPA); representatives of industry organizations and academics; as 
well as CARS program stakeholders, including representatives from 
consumer groups, scrap and salvage industries, automobile 
manufacturers, vehicle dealerships, and charities. GAO also 
interviewed officials from other domestic and international vehicle 
retirement programs and reviewed information about these programs. 

What GAO Found: 

Members of Congress and administration officials articulated two broad 
objectives for the CARS program: (1) help stimulate the economy and 
(2) put more fuel-efficient vehicles on the road. The program achieved 
these broad objectives; however, the extent to which it did so is 
uncertain. For example, nearly 680,000 consumers purchased or leased 
vehicles using the program’s credit, yet some of these sales would 
have happened anyway. Among others, NHTSA estimated how many sales 
were directly attributable to the program. In its report to Congress, 
the agency estimated that 88 percent of the 677,842 CARS transactions 
approved at the time of its report were directly attributable to the 
program. Additionally, NHTSA found that the average combined fuel 
economy of new vehicles purchased or leased under the program was 24.9 
miles per gallon, compared with 15.7 miles per gallon for vehicles 
traded in. According to the agency, however, the entire difference in 
combined fuel economy may not have been a direct result of the 
program. NHTSA also estimated that the program reduced fuel 
consumption for the typical CARS participant. NHTSA based these 
estimates on a consumer survey that it designed and implemented. 
However, largely because it had limited time to establish and 
administer the program, NHTSA did not follow some generally accepted 
survey design and implementation practices, thereby posing a potential 
risk to the reliability of estimates based on the survey data. 

Stakeholders in the CARS program reported varied experiences. 
Specifically, the program benefited eligible consumers, providing them 
with a monetary credit to help purchase or lease a new vehicle. GAO 
found that participation in the program was distributed across the 
country and reflected the U.S. population distribution. Many consumers 
contacted the Department of Transportation (DOT) about the program, 
but DOT officials reported that no systemic problems with the program 
were identified through these contacts. Representatives of scrap and 
salvage industries reported that the impact of the CARS program was 
mixed. Automobile manufacturers and eligible dealerships generally 
benefited from the increased sales the program generated, even though 
they identified some administrative challenges. Representatives GAO 
spoke with about the impact on used vehicle dealerships and charities 
reported mixed experiences during the program and said it would be 
difficult to isolate the impact of the CARS program. 

The CARS program and most other vehicle retirement programs GAO 
reviewed shared some similarities, but differed in their objectives, 
eligibility criteria, and incentives. Most of the programs required 
that the trade-in vehicle be operational and registered. However, only 
the CARS program used fuel economy as a criterion for the trade-in 
vehicle, while other programs used different criteria, such as the 
vehicle’s age or emissions. Moreover, while the CARS program 
established a price ceiling for the new vehicle, only one other 
program included such a criterion. All of the programs used monetary 
incentives to encourage participation, but the average CARS monetary 
credit—about $4,200—was larger than other programs’ incentives, which 
ranged from about $300 to $3,500. 

DOT and EPA commented on this report and provided technical comments, 
which GAO incorporated, as appropriate. DOT discussed the successes of 
the program and noted the limited time NHTSA had to design and 
implement the program’s consumer survey. 

View [hyperlink, http://www.gao.gov/products/GAO-10-486] or key 
components. For more information, contact A. Nicole Clowers at (202) 
512-2834 or clowersa@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

The CARS Program Achieved Its Broad Objectives, but the Extent to 
Which It Stimulated the Economy and Reduced Fuel Consumption is 
Uncertain: 

Stakeholders' Experiences with the CARS Program Varied: 

The CARS Program and Most Other Vehicle Retirement Programs Share Some 
Similarities, but Also Differences in Program Objectives, Eligibility 
Criteria, and Program Incentives: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: GAO's Analysis of the CARS Program's Consumer Survey: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Vehicle Categories of Trade-in and New Vehicles: 

Table 2: Domestic and International Vehicle Retirement Programs We 
Reviewed: 

Table 3: Domestic and International Vehicle Retirement Programs We 
Reviewed: 

Figures: 

Figure 1: CARS Program's Eligibility Criteria and Credit Amounts: 

Figure 2: CARS Program Process: 

Figure 3: CARS Program's Top Trade-in Vehicles by Make: 

Figure 4: CARS Program's Top Purchased or Leased New Vehicles by Make: 

Figure 5: Vehicle Sales from January 2005 through January 2010: 

Figure 6: Participation in the CARS Program: 

Abbreviations: 

CARS: Consumer Assistance to Recycle and Save: 

CEA: Council of Economic Advisers: 

DOT: Department of Transportation: 

EPA: Environmental Protection Agency: 

NHTSA: National Highway Traffic Safety Administration: 

NMVTIS: National Motor Vehicle Title Information System: 

OMB: Office of Management and Budget: 

TARP: Troubled Asset Relief Program: 

[End of section] 

United States Government Accountability Office: Washington, DC 20548: 

April 29, 2010: 

The Honorable Henry A. Waxman: 
Chairman: 
The Honorable Joe Barton: 
Ranking Member: 
Committee on Energy and Commerce: 
House of Representatives: 

The Honorable Jay Rockefeller: 
Chairman: 
The Honorable Kay Bailey Hutchison: 
Ranking Member: 
Committee on Commerce, Science, and Transportation: 
United States Senate: 

The recent financial crisis has affected many sectors of the economy, 
including the auto industry. Domestic automobile manufacturers and 
foreign manufacturers with production facilities in the United States 
have seen vehicle sales decrease and some factories idle. These 
decreasing sales have, in turn, contributed to layoffs of auto workers 
and declining revenues for dealerships and automotive parts suppliers. 
The federal government has taken steps to assist the ailing domestic 
auto industry in an effort to improve the economy. For example, the 
Department of the Treasury has provided more than $80 billion in 
financial assistance to the domestic auto industry since December 
2008.[Footnote 1] Over fourth-fifths (or approximately $67 billion) of 
that financial assistance was provided to two of the nation's three 
largest automobile manufacturers--Chrysler Group LLC and General 
Motors Company--and the federal government now has an unprecedented 
ownership stake in both of those manufacturers. 

The federal government has also sought to help manufacturers manage 
the capital costs associated with producing advanced technology 
vehicles. In 2007, Congress established the Advanced Technology 
Vehicle Manufacturing loan program, which offers low-cost loans to 
automobile manufacturers and component parts suppliers to retool aging 
plants or build new plants that will lead to the production of 
advanced vehicles that are at least 25 percent more fuel-efficient 
than current vehicles for sale or advanced technology components for 
these new vehicles.[Footnote 2] 

To further aid the auto industry and boost the economy, President 
Obama signed into law the Consumer Assistance to Recycle and Save 
(CARS) Act on June 24, 2009.[Footnote 3] The act directed the 
Secretary of Transportation to establish and administer a vehicle 
retirement program through which owners of vehicles meeting 
statutorily specified criteria could receive a monetary credit for 
trading in their vehicle and purchasing or leasing a new, more fuel-
efficient vehicle. The act originally appropriated $1 billion for the 
CARS program (commonly known as "Cash for Clunkers") and established a 
period of eligibility between July 1, 2009, and November 1, 2009. The 
National Highway Traffic Safety Administration (NHTSA) had 
responsibility for developing the implementing regulations for and 
administering the program. The act required NHTSA to publish the 
program's final implementing regulations within 30 days of enactment. 
NHTSA carries out highway safety and consumer programs and sets fuel 
economy standards for passenger cars and light trucks sold in the 
United States, but had no previous experience overseeing a vehicle 
retirement program.[Footnote 4] NHTSA established the program's 
implementing regulations within the time required by the CARS Act on 
July 23, 2009, and eligible vehicle dealerships began submitting 
applications for the program's credit on behalf of participating 
consumers beginning July 27, 2009. High consumer interest during the 
first days of the program led Congress to appropriate an additional $2 
billion for the program on August 7, 2009.[Footnote 5] To ensure the 
program's appropriated funding would be sufficient for all completed 
transactions, NHTSA closed the program to new transactions on August 
24, 2009, and required all transactions to be submitted for approval 
by August 25, 2009. 

According to the Congressional Research Service, vehicle retirement 
programs have been used both internationally and domestically--at the 
state level--to provide an economic incentive for the owners of older 
or highly polluting vehicles to retire their vehicles permanently from 
use.[Footnote 6] Vehicle retirement programs are currently or have 
recently been carried out in other countries, including Canada, 
France, Germany, Italy, Japan, Spain, and the United Kingdom. In 
addition, since the early 1990s, domestic vehicle retirement programs 
or related pilot projects have been carried out in a handful of states 
including California, Colorado, Delaware, Illinois, Texas, and 
Virginia. The CARS program was the first federal vehicle retirement 
program in the United States. 

The August 7, 2009, legislation that provided supplemental funding for 
the CARS program also directed us to review the administration of the 
CARS program within 180 days of the end of its authorization on 
November 1, 2009. In response, this report addresses (1) what is known 
to date about the extent to which the CARS program achieved its 
objectives; (2) what stakeholders' experiences were with the CARS 
program; and (3) how the CARS program compares to other selected 
domestic and international vehicle retirement programs. The Department 
of Transportation's (DOT) Inspector General is also issuing its report 
today; the Inspector General's report examines the effectiveness of 
NHTSA's controls over CARS transactions, implementation challenges, 
and NHTSA's progress toward evaluating compliance and accounting for 
total program costs.[Footnote 7] 

To prepare this report, we reviewed pertinent federal legislation, 
regulations, and reports, such as the CARS legislation and documents 
that the legislation directed NHTSA to prepare, including NHTSA's 
implementing regulations for the CARS program and a report to Congress 
on the CARS program. We also reviewed NHTSA's regulatory impact 
analysis of the CARS program, as well as related documents from other 
federal entities, including the Council of Economic Advisers (CEA), 
the Congressional Budget Office, the Congressional Research Service, 
and the Office of Management and Budget (OMB). 

In addition, we conducted, summarized, and analyzed in-depth 
interviews with officials from vehicle retirement programs in 
California, Texas, Canada, and Germany and reviewed the programs' 
documentation on areas such as the eligibility criteria and program 
incentives. We selected vehicle retirement programs for our review 
that were ongoing or recently completed, were cited by auto industry 
associations and experts, or were consulted by NHSTA during its 
development of the CARS program's implementing regulations. We also 
interviewed officials from Germany's Supreme Auditing Institution 
which was responsible for evaluating Germany's vehicle retirement 
program. Finally, we contacted industry experts; academics; consumer 
groups; and representatives of new and used vehicle dealers, 
manufacturers, the scrap and salvage industries, and charities that 
receive vehicle donations. See appendix I for more information about 
our scope and methodology. 

We conducted this performance audit from September 2009 through April 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Background: 

Under the CARS program, participating consumers received a $3,500 or 
$4,500 credit to purchase or lease an eligible new vehicle. The CARS 
program required that both the trade-in vehicle and the purchased or 
leased new vehicle meet certain requirements, including combined fuel 
economy thresholds.[Footnote 8] In general, for a trade-in vehicle to 
be eligible as a "clunker," it had to: 

* be in drivable condition; 

* have been continuously insured and registered for 1 year or more 
prior to trade in; 

* have been manufactured less than 25 years before the transaction; 
and: 

* have a maximum combined fuel economy of 18 miles per gallon. 
[Footnote 9] 

For a new vehicle to be eligible, it had to be a passenger car, 
category 1 truck (e.g., sport utility vehicle), category 2 truck 
(e.g., large van or large pickup truck), or category 3 truck (e.g., 
very large van or very large pickup truck). The new vehicle also 
generally had to have a better combined fuel economy than the trade-in 
vehicle, as determined by the EPA. 

The credit amount generally depended on the type and combined fuel 
economy of both the trade-in and new vehicle. Specifically, in all 
transactions except those involving category 3 trucks, receiving the 
higher credit amount required a greater improvement in the combined 
fuel economy from the trade-in to the new vehicle, although heavier 
vehicles required a smaller improvement in combined fuel economy than 
passenger cars to receive the maximum credit ($4,500). Figure 1 
provides additional information on the program's eligibility criteria 
and credit amounts. 

Figure 1: CARS Program’s Eligibility Criteria and Credit Amounts: 

[Refer to PDF for image: illustrated table] 

Type of new vehicle purchased or leased: Passenger car; 
The combined fuel economy of the new vehicle must be: At least 22 
MPG[A]; 
The type of vehicle traded in is: Passenger vehicle, category 1 or 2 
truck (must have a combined fuel economy rating of 18 MPG or less); 
Amount of credit: If the difference in combined fuel economy of the 
new and trade-in vehicle is: 4-9 MPG, the credit is: $3,500; 
Amount of credit: If the difference in combined fuel economy of the 
new and trade-in vehicle is: 10 MPG or more, the credit is: $4,500; 

Type of new vehicle purchased or leased: Category 1 truck (e.g., sport 
utility vehicle); 
The combined fuel economy of the new vehicle must be: At least 18 MPG; 
The type of vehicle traded in is: Passenger vehicle, category 1 or 2 
truck (must have a combined fuel economy rating of 18 MPG or less); 
Amount of credit: If the difference in combined fuel economy of the 
new and trade-in vehicle is: 2-4 MPG, the credit is: $3,500; 
Amount of credit: If the difference in combined fuel economy of the 
new and trade-in vehicle is: 5 MPG or more, the credit is: $4,500; 

Type of new vehicle purchased or leased: Category 2 truck (e.g., large 
van or large pickup truck); 
The combined fuel economy of the new vehicle must be: At least 15 MPG; 
The type of vehicle traded in is: Category 2 truck (must have a 
combined fuel economy rating of 18 MPG or less); 
Amount of credit: If the difference in combined fuel economy of the 
new and trade-in vehicle is: 1 MPG, the credit is: $3,500; 
Amount of credit: If the difference in combined fuel economy of the 
new and trade-in vehicle is: 2 MPG or more, the credit is: $4,500; 

Type of new vehicle purchased or leased: Category 2 truck (e.g., large 
van or large pickup truck); 
The combined fuel economy of the new vehicle must be: At least 15 MPG; 
The type of vehicle traded in is: Category 3 truck (EPA does not rate 
fuel economy of category 3 trucks); 
Amount of credit: If the difference in combined fuel economy of the 
new and trade-in vehicle is: NA, the credit is: $3,500; 

Type of new vehicle purchased or leased: Category 3 truck (e.g., very 
large van or very large pickup truck); 
The combined fuel economy of the new vehicle must be: N/A (EPA does 
not rate fuel economy of category 3 trucks); 
The type of vehicle traded in is: Category 3 truck; 
Amount of credit: If the difference in combined fuel economy of the 
new and trade-in vehicle is: N/A, However, the new vehicle must have 
an equal or lesser Gross Vehicle Weight Rating; 
Amount of credit: The credit is: $3,500. 

Source: GAO analysis of CARS program regulations. 

[A] MPG = Miles Per Gallon. 

[End of figure] 

Consumers and dealers were required to take several steps to 
participate in the CARS program (see figure 2). The consumer had to 
bring an eligible trade-in vehicle to a dealer and purchase or lease 
an eligible new vehicle. Then, the dealer had to ensure that both 
vehicles met the program's eligibility criteria, provide the consumer 
with a credit toward the purchase or lease of the new vehicle, disable 
the engine of the trade-in vehicle, submit a complete application for 
reimbursement to NHTSA, and arrange for disposal of the trade-in 
vehicle. To arrange for vehicle disposal, dealers could elect to 
either transfer the trade-in vehicle directly to a qualified disposal 
facility or transfer it indirectly via a salvage auction. If the trade-
in vehicle was transferred via a salvage auction, only disposal 
facilities were eligible to participate in the auction.[Footnote 10] 
The qualified disposal facility was required to remove and dispose of 
all toxic or hazardous vehicle components, crush or shred the vehicle, 
and report that the vehicle had been received and then crushed or 
shredded to the National Motor Vehicle Title Information System 
(NMVTIS) overseen by the Department of Justice.[Footnote 11] 

Figure 2: CARS Program Process: 

[Refer to PDF for image: illustration] 

Trade in and disposal process: 

Consumer trades in vehicle: 
New vehicle and $3,500 or $4,500 credit. 

Dealer: 
Trade-in engine disabled. 
Reporting/administrative requirement: 
NHTSA: Reviews applications for reimbursement from dealer; issues 
$3,500 or $4,500 reimbursement to dealer. 

Trade-in: 
Salvage auction (optional). 

Disposal facility: 
Salvage or scrap facility crushes or shreds trade-in. 
Reporting/administrative requirement: 
NMVTIS: Reflects status updates as trade-in vehicle is (1) received 
and (2) crushed or shredded. 

Source: GAO analysis of CARS program regulations. 

[End of figure] 

The CARS legislation required the Secretary of Transportation, acting 
through NHTSA, to submit a report to Congress describing the efficacy 
of the CARS program no later than 60 days after November 1, 2009. 
[Footnote 12] NHTSA, a modal administration within DOT,[Footnote 13] 
prepared the report and found that 677,842 vehicles received a credit 
through the CARS program, with an average credit amount of $4,209 (for 
a total value of $2,853,416,000).[Footnote 14] NHTSA's report to 
Congress also stated that the number of vehicles traded in under the 
CARS program accounted for less than 1 percent of the total on-road 
vehicle fleet in the United States. As shown in table 1, the majority 
of the trade-in vehicles (approximately 85 percent) were category 1 or 
category 2 trucks, while the majority of new vehicles were passenger 
cars (approximately 59 percent). Figure 3 illustrates the most common 
makes of vehicles traded in by participants. According to NHTSA, 
approximately 49 percent of the new vehicles sold under the program 
were manufactured by domestic and foreign automobile manufacturers in 
the United States and the most popular new vehicle makes were Toyota, 
Ford, Honda, Chevrolet, Nissan, and Hyundai (see figure 4). 

Table 1: Vehicle Categories of Trade-in and New Vehicles: 

Vehicle category: Passenger car: Total vehicles; 
Trade-in: 94,834; 
New: 401,274. 

Vehicle category: Passenger car: Percentage of transactions; 
Trade-in: 13.99%; 
New: 59.20%. 

Vehicle category: Category 1 truck: Total vehicles; 
Trade-in: 446,323; 
New: 225,985. 

Vehicle category: Category 1 truck: Percentage of transactions; 
Trade-in: 65.84%; 
New: 33.34%. 

Vehicle category: Category 2 truck: Total vehicles; 
Trade-in: 129,732; 
New: 48,617. 

Vehicle category: Category 2 truck: Percentage of transactions; 
Trade-in: 19.14%; 
New: 7.17%. 

Vehicle category: Category 3 truck: Total vehicles; 
Trade-in: 6,953; 
New: 1,966. 

Vehicle category: Category 3 truck: Percentage of transactions; 
Trade-in: 1.03%; 
New: 0.29%. 

Vehicle category: Total; 
Trade-in: 677,842; 
New: 677,842. 

Source: NHTSA. 

[End of table] 

Figure 3: CARS Program's Top Trade-in Vehicles by Make: 

[Refer to PDF for image: pie-chart] 

Ford: 28.9%; 
Chevrolet: 17.5%; 
Dodge: 10.9%; 
Jeep: 9.4%; 
GMC: 5.1%; 
Other: 28.2%. 

Source: NHTSA. 

[End of figure] 

Figure 4: CARS Program's Top Purchased or Leased New Vehicles by Make: 

[Refer to PDF for image: pie-chart] 

Toyota: 17.8%; 
Ford: 13.3%; 
Honda: 12.9%; 
Chevrolet: 12.7%; 
Nissan: 8.7%; 
Hyundai: 7.2%; 
Other: 27.4%. 

Source: NHTSA. 

[End of figure] 

To collect information for its report to Congress on the efficacy of 
the CARS program, NHTSA designed and implemented a voluntary consumer 
survey to help determine what CARS program participants would have 
done in the absence of the CARS program. Dealers were required to 
provide participants with a copy of this survey, which included three 
questions: 

1. If you were not offered the CARS program trade-in incentive, would 
you still have traded in your current vehicle to purchase a new or 
used vehicle this month? 

2. If you were not offered the CARS program trade-in incentive, when 
you disposed of this vehicle, would you have purchased another vehicle? 

3. What is your best estimate of the number of miles you drove the 
traded-in vehicle during the past 12 months? 

The CARS Program Achieved Its Broad Objectives, but the Extent to 
Which It Stimulated the Economy and Reduced Fuel Consumption is 
Uncertain: 

The CARS Program's Two Broad Objectives Were To Help Stimulate the 
Economy and To Put More Fuel-Efficient Vehicles On the Road: 

Members of Congress and administration officials articulated two broad 
objectives for the CARS program in statements, press releases, or 
program documents, including the program's implementing regulations. 
[Footnote 15] These broad objectives were to (1) help stimulate the 
economy and (2) put more fuel-efficient vehicles on the road. For 
example: 

* DOT, in the CARS program's implementing regulations, stated that the 
program's principal goal was to encourage replacement of older, less 
fuel-efficient vehicles with new, more fuel-efficient cars and trucks. 
[Footnote 16] 

* President Obama, during his remarks on the economy on July 31, 2009, 
stated that the CARS program was an effort to boost the economy and 
sell more fuel-efficient vehicles. 

* In comments made on August 6, 2009, the Secretary of Transportation 
stated that the program removed fuel-inefficient vehicles and replaced 
them with fuel-efficient ones, making the program a "win-win for our 
economy and our environment." 

* A press release from a member of Congress on July 24, 2009, stated 
that the program was designed to energize the economy by boosting auto 
sales, and will put safer, more fuel-efficient vehicles on road. 

The CARS Program Achieved Its Broad Objective of Helping to Stimulate 
the Economy, but the Extent of This Effect Is Uncertain: 

The CARS program helped to stimulate the economy, thereby achieving 
one of its broad objectives. Several indicators can be used to assess 
the program's stimulative effect on the economy, including vehicle 
sales, Gross Domestic Product, and employment. The studies we reviewed 
showed that the program helped to stimulate economic activity as 
measured by these three indicators. However, our review of the studies 
also found that the extent of the program's stimulative effect on the 
economy is uncertain. 

Vehicle Sales: 

One economic indicator for the CARS program is vehicle sales--that is, 
whether the program increased the number of vehicles sold. Figure 5 
illustrates that, according to Bureau of Economic Analysis data, 
overall vehicle sales increased during the months of the CARS program 
(July and August 2009) compared with most months in the preceding 
year, when the economic recession drove vehicle sales down to pre-2005 
levels. The studies we reviewed, including those from NHTSA and CEA, 
concluded that vehicle sales during July and August 2009 were, to some 
degree, attributable to the CARS program. 

Figure 5: Vehicle Sales from January 2005 through January 2010: 

[Refer to PDF for image: combined vertical bar and line graph] 

Passenger car and truck sales – not seasonally adjusted (in thousands): 

2005: 
January: 1,060.5; 
February: 1,250.7; 
March: 1,572.6; 
April: 1,499.4; 
May: 1,495.8; 
June: 1,673.8; 
July: 1,804.3; 
August: 1,480.8; 
September: 1,325.9; 
October: 1,143.2; 
November: 1,161.5; 
December: 1,479.7. 

2006: 
January: 1,139.9; 
February: 1,257.2; 
March: 1,525.6; 
April: 1,443.8; 
May: 1,485; 
June: 1,496; 
July: 1,489.6; 
August: 1,482.6; 
September: 1,350.4; 
October: 1,213.1; 
November: 1,194.8; 
December: 1,426.1. 

2007: 
January: 1,087.4; 
February: 1,251.1; 
March: 1,536.9; 
April: 1,332.4; 
May: 1,558.7; 
June: 1,450.2; 
July: 1,304.4; 
August: 1,471.3; 
September: 1,310.4; 
October: 1,226.6; 
November: 1,175.3; 
December: 1,384.4. 

2008: 
January: 1,039.1; 
February: 1,171.7; 
March: 1,351.5; 
April: 1,243.6; 
May: 1,392.9; 
June: 1,185.3; 
July: 1,132.3; 
August: 1,246.8; 
September: 962.3; 
October: 834.6; 
November: 743.6; 
December: 891.3. 

2009: 
January: 654.7; 
February: 687.1; 
March: 855.1; 
April: 817.3; 
May: 923.9; 
June: 857.4; 
July: 995.7 (Passenger car and truck sales during months of CARS 
program); 
August: 1,260 (Passenger car and truck sales during months of CARS 
program); 
September: 744.1; 
October: 835.6; 
November: 744.3; 
December: 1,026.3. 

2010: 
January: 695.7. 

Line in the graph represents linear passenger car and truck sales. 

Source: GAO analysis of Bureau of Economic Analysis data. 

[End of figure] 

The extent to which the program stimulated vehicle sales, as measured 
by the number of vehicle sales attributable to the CARS program, is 
unclear. While some of the increase in vehicle sales in July and 
August 2009 is attributable to the CARS program, a portion of the 
sales would have likely occurred even if the program had not been 
implemented. To estimate the number of vehicle sales attributable to 
the CARS program, it is important to calculate "incremental vehicle 
sales"--that is, identify those vehicle sales that occurred because of 
the program and exclude those sales that would have occurred in the 
absence of the program. Among the estimates of incremental vehicle 
sales we identified, we found that a variety of methods were applied 
to produce the estimates, and that all of the estimates had 
limitations. For example: 

* According to NHTSA's analysis in its report to Congress, 597,950 
vehicle sales or 88 percent of the 677,842 sales that received a 
credit through the CARS program were incremental vehicle sales. To 
calculate this estimate of incremental vehicle sales, NHTSA relied on 
responses to the program's voluntary consumer survey. Specifically, 
survey respondents were asked if they were not offered the CARS 
program credit, would they still have traded in their current vehicle 
and purchased a new vehicle during the month in which they 
participated in the program. NHTSA considered any transaction to be an 
incremental vehicle sale when respondents indicated that they would 
have traded in and purchased a new or used vehicle at a later time. 
However, largely because NHTSA had limited time to establish and 
administer the program, it did not follow some generally accepted 
survey design and implementation practices, thereby posing a potential 
risk to the reliability of estimates based on the survey data. See 
appendix II for more information on our analysis of NHTSA's consumer 
survey. 

* According to CEA, approximately 440,000 vehicle sales, or 64 percent 
of the 690,114 applications submitted for the CARS credit, were 
incremental sales attributable to the CARS program.[Footnote 17] CEA 
estimated incremental vehicle sales attributable to the CARS program 
by subtracting (1) an estimate of the number of people who would have 
normally traded in vehicles characteristic of those traded in during 
the CARS program and (2) an estimate of the number of people who held 
off purchases in June waiting for the program to officially begin. 
CEA's estimate may be limited by its assumption about the number of 
vehicles that would have been traded in normally since this number may 
not be reflective of what actually happened during the CARS program. 

* Industry organizations, such as Edmunds.com and Maritz Automotive 
Research Group, also estimated incremental vehicle sales attributable 
to the CARS program. For example, Edmunds.com estimated that 125,000 
incremental vehicle sales were attributable to the program. To produce 
this estimate, Edmunds.com first developed a hypothetical scenario to 
understand how many vehicles would have sold in the absence of the 
CARS program using market share information and actual sales data of 
vehicles that were not eligible for purchase or lease under the 
program, such as luxury cars. Edmunds.com then took the difference 
between sales in the hypothetical scenario and both actual sales data 
and estimated expected sales between October 2009 and August 2010, and 
considered the difference between these to be incremental vehicle 
sales attributable to the CARS program. This scenario relies on 
certain assumptions, which may differ from reality, such as its 
assumption that the share of sales of vehicles not eligible under the 
program as a percentage of the total sales remains stable before, 
during, and after the CARS program. Additionally, Maritz Automotive 
Research Group estimated that 542,000 incremental vehicle sales were 
attributable to the CARS program based on a survey that the 
organization provided to consumers who purchased or leased new 
vehicles during the CARS program. Specifically, Maritz Automotive 
Research Group asked consumers if the CARS program was the reason they 
purchased or leased a vehicle when they did and, based on responses to 
this question, estimated the number of incremental vehicle sales 
attributable to the program. As with the other estimates we 
identified, this estimate has limitations. For example, the survey 
does not ask respondents when they would have purchased or leased the 
vehicle in the absence of the program. Therefore, according to a 
Maritz Automotive Research Group official, the survey data did not 
allow the organization to determine the extent to which the program 
pulled forward vehicle purchases or leases.[Footnote 18] 

In addition, to fully assess the impact of the CARS program on vehicle 
sales, it is important to account for changes in vehicle sales 
following the program. Incentive programs like the CARS program can 
have a "pull forward" effect--that is, they encourage immediate 
purchases of vehicles that buyers had planned to purchase in future 
months--thus, there can be a decline in vehicle sales during those 
future months, according to CEA. Bureau of Economic Analysis data show 
that in September 2009, vehicle sales dropped approximately 41 percent 
compared with August 2009; yet, these data also show that vehicle 
sales were higher in each month of the last quarter in 2009 than in 
September 2009. The extent to which the program impacted vehicle sales 
during these months is unclear, in part, because other factors, such 
as the condition of the economy, could have affected vehicle sales 
after the program ended. NHTSA analyzed how far the program pulled 
vehicle sales forward by using the results of its consumer survey. 
According to the agency, of respondents who indicated in the survey 
that they would not have traded in their current vehicle and purchased 
a new vehicle during the month in which they participated in the 
program, most reported that they would have traded in, sold or 
disposed of their trade-in vehicle in 2 years or less, with 2 years 
from the time of their CARS purchase being selected most frequently. 
However, as discussed previously, we found a potential risk to the 
reliability of NHTSA's estimates based on the consumer survey data. 
CEA also analyzed how vehicle sales changed following two other 
incentive programs in order to estimate how vehicle sales might be 
impacted following the CARS program; but, CEA concluded that the 
results of this analysis could not be used to reliably estimate how 
vehicle sales might be impacted following the program.[Footnote 19] 

Gross Domestic Product: 

Another indicator of the CARS program's economic impact is the extent 
to which the program impacted the nation's economic output, as 
measured by Gross Domestic Product. Both NHTSA and CEA estimated the 
CARS program's impact on Gross Domestic Product, and both concluded 
that the program had a direct economic impact. NHTSA estimated that 
the impact on Gross Domestic Product from the CARS program was 
approximately $6.8 billion. CEA estimated the program's impact on 
Gross Domestic Product in the second half of 2009 would be between 
$2.5 billion and $6 billion. 

However, the full extent of the program's impact on Gross Domestic 
Product is uncertain. Fully assessing the program's impact on Gross 
Domestic Product requires information on, for example, (1) the number 
of incremental vehicle sales attributable to the CARS program and (2) 
information on how automobile manufacturers managed inventory and 
production in response to those incremental sales. As discussed, there 
is little consensus on the number of incremental sales attributable to 
the CARS program. Furthermore, while auto industry representatives 
that we spoke with said that CARS program sales reduced vehicle 
inventory, it is not clear how much of the reduction in inventory led 
to increased automobile manufacturing and, therefore, a positive 
impact on Gross Domestic Product.[Footnote 20] Given these 
uncertainties, there are limitations to the estimates produced by 
NHTSA and CEA of the CARS program's impact on Gross Domestic Product. 

Employment: 

The extent to which the CARS program led to changes in the number of 
jobs created or retained is another indicator of the program's 
stimulative effect on the economy. According to federal government 
evaluations, the CARS program created or retained jobs. CEA estimated 
that 40,000 to 120,000 jobs were created or retained in the second 
half of 2009 as a result of the CARS program, whereas NHTSA estimated 
that at least 60,000 jobs were created or retained during the same 
period.[Footnote 21] These estimates vary, in part, because 
information required to account for the full impact of the CARS 
program is limited. For example, as discussed, there is no consensus 
on how many vehicle sales were attributable to the CARS program, which 
limits the ability to estimate additional vehicle production and, 
thus, manufacturing jobs created by the program. Moreover, 
manufacturers may have responded to demand for new vehicles generated 
as a result of the program by increasing the number of hours in their 
existing workforce, thus affecting jobs retained by the program; 
however, data to account for this impact is limited. 

While CEA and NHTSA used similar methodologies, the differences in 
their estimates highlight the challenge of determining the CARS 
program's impact on employment. For example, though CEA and NHTSA 
determined their estimates using similar methodologies, their 
estimates varied because of differing assumptions. Specifically, both 
CEA and NHTSA assumed how many vehicles an average auto worker would 
produce per year and then derived the number of jobs that could be 
attributable to the CARS program using its estimate of incremental 
vehicle sales. However, CEA and NHTSA made different assumptions about 
how many vehicles an average auto worker could produce per year; CEA 
based its estimates on data for 2006, when vehicle sales and 
production were near their peak and NHTSA based its estimates on data 
for 2006 and 2008. Moreover, since the CARS program was temporary, the 
permanency of any employment impact is more difficult to gauge, and 
neither CEA nor NHTSA estimated how many jobs would last beyond the 
second half of 2009. CEA acknowledged that its employment impact 
estimates were more uncertain than its Gross Domestic Product 
estimates. 

The CARS Program Achieved Its Broad Objective of Putting More Fuel- 
Efficient Vehicles on the Road; the Extent to Which the Program 
Reduced Fuel Consumption Is Uncertain: 

The CARS program put more fuel-efficient vehicles on the road, thereby 
achieving one of the program's broad objectives. According to NHTSA's 
report to Congress, the average combined fuel economy of trade-in 
vehicles was 15.7 miles per gallon and that of new vehicles was 24.9 
miles per gallon, a 58.6 percent increase in fuel economy. Moreover, 
the report stated that since the CARS program required that 
participating consumers purchase or lease vehicles that are more fuel-
efficient than their trade-in vehicles, the improved vehicle fuel 
economy will help reduce fuel consumption. 

Although the CARS program put more fuel-efficient vehicles on the 
road, the extent to which the program reduced overall fuel consumption 
is uncertain. According to NHTSA, the entire difference in combined 
fuel economy between trade-in and new vehicles may not have been a 
direct result of the CARS program since some consumers may have 
purchased or leased more fuel-efficient vehicles even in the absence 
of the program. Moreover, in addition to a vehicle's combined fuel 
economy, other factors may impact overall fuel consumption. For 
example, fuel economy improvements reduce the fuel cost per mile of 
travel and, thus, may lead to increases in the miles driven which 
offsets some of the reduction in fuel consumption--a phenomenon 
commonly referred to as the "rebound effect." To determine the type 
and combined fuel economy of the vehicles consumers would have 
purchased or leased in the absence of the CARS program and estimate 
the impact of the program on fuel consumption, NHTSA relied on the 
results of the program's consumer survey. Specifically, for each 
consumer who indicated they would have replaced their vehicle on the 
consumer survey, NHTSA calculated the difference between the actual 
combined fuel economy of the new vehicle purchased or leased under the 
CARS program and the estimated combined fuel economy of the 
replacement vehicle selected on the survey. Based on these 
differences, NHTSA estimated that the program reduced fuel consumption 
for the typical CARS participant by approximately 10 percent. However, 
as noted, largely because of the limited time NHTSA had to establish 
and administer the program, it did not follow some generally accepted 
survey design and implementation practices, thereby posing a potential 
risk to the reliability of the agency's survey-based estimate of 
reduced fuel consumption. See appendix II for more information on our 
analysis of NHTSA's consumer survey. 

In addition, NHTSA's analysis of the CARS program's impact does not 
account for the energy consumed and greenhouse gas and criteria 
pollutant emissions produced in prematurely disposing of the trade-in 
vehicle and in manufacturing the new vehicle.[Footnote 22] NHTSA 
officials stated that these impacts would be marginal and difficult to 
measure, because they are dependent on many unknown or highly variable 
factors. However, according to studies we reviewed, if factored into 
the analysis, energy consumed to prematurely dispose of the trade-in 
vehicle and manufacture the new vehicle may offset some of the 
program's effect on emission reductions. For example, retiring an 
older vehicle before the end of its useful life will reduce the 
greenhouse gas and criteria pollutant emissions produced during the 
vehicle's "use" phase.[Footnote 23] However, energy is consumed and 
emissions are produced during all phases of a vehicle's life, 
including those considered "nonuse" phases, such as raw material 
extraction, materials production, parts manufacture, vehicle assembly, 
recovery/recycling, and disposal. According to one study, even if 
consumers would have disposed of their vehicles and purchased or 
leased new vehicles at some later date, the extent to which the CARS 
program accelerated these processes will cause additional emissions to 
be produced. Consequently, energy consumed and emissions produced to 
prematurely dispose of the trade-in vehicle and manufacture the new 
replacement vehicle may offset some of the program's positive impact 
on emissions. According to an author of the study, although 
preliminary analysis indicates that the program will have a 
significant net reduction in energy consumption and greenhouse gas 
emissions, the magnitude of the net reduction is very sensitive to the 
expected remaining life of the trade-in vehicle in the absence of the 
CARS program. 

Stakeholders' Experiences with the CARS Program Varied: 

The CARS program affected a range of stakeholders, and their 
experiences with the program varied. Through our literature review, we 
identified a number of stakeholders who were involved with or impacted 
by the CARS program including consumers, the scrap and salvage 
industries, manufacturers, eligible dealerships, used vehicle 
dealerships, and charities. The following summarizes these 
stakeholders' experiences with the program. 

Consumers: 

There was early and widespread participation by consumers eligible for 
the CARS program credit. The CARS program benefited participating 
consumers by providing a $3,500 or $4,500 credit toward the purchase 
or lease of a new vehicle in exchange for their trade-in vehicle. 
[Footnote 24] While requirements for participation meant that not all 
consumers were eligible to participate, a large number of consumers 
were eligible and quickly took advantage of the program, outpacing 
initial expectations about how many consumers would participate in the 
program. For example, while the program was authorized to last for 4 
months, it lasted less than 2 months before officials closed it, 
because funding was running out.[Footnote 25] Our analysis of CARS 
transaction data also shows that consumer participation in the program 
was distributed across the country and reflected the U.S. population 
distribution (see figure 6). 

Figure 6: Participation in the CARS Program: 

[Refer to PDF for image: illustrated map of the U.S.] 

The map depicts CARS program transactions by zip code in the following 
categories: 

More than 100; 
51 to 100; 
26 to 50; 
1 to 25. 

Source: GAO analysis of CARS data; Map Art (map). 

[End of figure] 

Despite the popularity of the CARS program, consumers raised a number 
of questions and concerns about their experiences. For example, 
according to NHTSA's report to Congress, the agency's CARS hotline 
received nearly 900,000 calls during the first few weeks of the 
program that included questions and concerns. NHTSA officials told us 
that few of the calls they received about the program required 
additional follow-up and that no systemic problems with the program 
were identified based on information received during the calls. In 
addition, the DOT Inspector General's hotline complaint center was 
contacted approximately 4,200 times about the CARS program; however, 
few of these contacts involved cases of potential fraud. Specifically, 
according to an Inspector General official, 23 of the contacts to the 
hotline involved potential fraud cases, and these cases were forwarded 
to NHTSA for follow up. The official from the Inspector General added 
that most of these 23 cases alleged that trade-in vehicles were being 
resold or that vehicles which were not in drivable condition were 
being accepted for trade in--neither of which is permitted under the 
CARS program's legislation and implementing regulations. Moreover, 
according to the official, the allegations of fraud to the Inspector 
General's hotline did not involve systemic fraud in the CARS program, 
but rather individual cases of potential fraud. 

Representatives of consumer groups told us that they were contacted by 
consumers with concerns about the program. According to these 
representatives, the nature of the contacts varied and included 
concerns about such issues as how long it took to get a response from 
NHTSA's CARS hotline, ineligibility due to lapses in vehicle 
registration, and agreements that dealers were requiring CARS program 
participants to sign under which a participant would have to reimburse 
the dealer if the federal government rejected an application. One of 
the consumer group representatives also expressed concern that NHTSA 
was not publicly providing information about the program's 
transactions in a timely fashion for real-time analysis and submitted 
a Freedom of Information Act request for this information. NHTSA 
subsequently provided transaction information on its CARS Web site. 

Scrap and Salvage Industries: 

Representatives of scrap and salvage industries reported that the 
impact of the CARS program was mixed. Officials we interviewed 
representing the scrap industry, which shreds and recycles materials 
from the trade-in vehicles, told us that their industry had sufficient 
capacity to handle the volume of trade-in vehicles due to the CARS 
program. Specifically, according to one of the officials we spoke 
with, the domestic scrap industry processes approximately 12 million 
to 16 million vehicles a year and, therefore, the existing processing 
capacity was sufficient to handle the volume of vehicles received from 
the CARS program. This official added that any impact from the CARS 
program on scrap metal prices would likely be minimal. The scrap 
industry officials we spoke with also stated that the industry 
identified some challenges associated with the program's requirements. 
For example, one official stated that scrap and salvage facilities 
report vehicle status to NMVTIS through firms that charge a fee for 
each report, and that the CARS program required two separate reports 
to NMVTIS when the vehicle was (1) received and (2) crushed or 
shredded. 

According to officials we interviewed representing the salvage 
industry, which recycles automotive parts for reuse, the CARS 
program's impact was mixed. These officials stated that the program 
increased the volume and quality of vehicles they received. However, 
the CARS program's implementing regulations posed certain challenges. 
For example, the program's implementing regulations prohibited the 
resale of engines and assembled drive trains from vehicles traded in 
under the program, potentially reducing the program's value for the 
industry. The officials we spoke with representing the industry stated 
that the engine and drive train generally constitute 60 to 65 percent 
of a salvaged vehicle's value. Another issue these salvage industry 
officials cited was the program's requirement to crush or shred 
vehicles traded in as part of the CARS program within 180 days. 
According to these officials, the number of CARS vehicles to be 
crushed or shredded created a potential problem in meeting this 180-
day requirement. In February 2010, NHTSA issued a rule extending the 
deadline for crushing or shredding a vehicle from 180 days to 270 
days. These issues aside, officials also said that the number of 
vehicles received by salvage facilities during the program was two to 
three times greater than normal, and that the quality of the vehicles 
received was better as well. The officials added that the better 
quality of vehicles received under the program contributed to more 
business at salvage facilities. 

Manufacturers: 

Representatives of automobile manufacturers we contacted reported that 
although the CARS program increased sales of new vehicles, the 
program's administrative requirements presented some challenges. When 
asked to describe the impact of the CARS program on sales, employment, 
production and/or inventory, representatives of automobile 
manufacturers we contacted reported generally positive results. 
Specifically, six of eight manufacturers reported that the CARS 
program lowered vehicle inventories and five of eight reported 
increased production. Further, two manufacturers reported that the 
program sustained or preserved existing employment levels. 
Nevertheless, manufacturers cited challenges in administering the 
program. Several manufacturers reported that the program's 
implementing regulations were either not finalized in a timely manner 
or changed, resulting in, for example, questions for the manufacturers 
from dealerships about the program's intent. As another example, 
several manufacturers reported that their dealerships experienced 
difficulties registering or obtaining authorization information 
necessary to participate in the program. According to NHTSA officials, 
the agency published the implementing regulations within the time 
frame established by the CARS Act and offered multiple Webinars to 
answer stakeholders' questions about the program. 

Eligible Dealerships: 

Representatives we interviewed from a dealership association and from 
dealerships that were eligible to participate in the CARS program 
reported that, despite some administrative challenges, they benefited 
from the CARS program. Some of the representatives told us that they 
faced some challenges handling the high volume of consumer 
participation or certain requirements of the program, such as 
determining consumer eligibility. Further, representatives from the 
association and one of the dealerships reported that NHTSA's online 
system for processing CARS program transactions was another 
administrative challenge they faced. According to NHTSA's report to 
Congress, the high volume of transactions received during the first 
few days in which the system was operational contributed to 
disruptions in the reimbursement system, and the subsequent 
appropriation of another $2 billion for the program created further 
disruptions. These representatives stated that another administrative 
challenge they faced was the length of time it took to receive 
reimbursements for the CARS program. While the CARS Act directed NHTSA 
to develop procedures for a maximum 10-day turnaround for dealer 
reimbursement, NHTSA's report to Congress determined that the mean 
processing time for completed submissions was 16.9 days because of the 
high volume of participation and the need for many dealers to resubmit 
applications that were not properly completed. 

Even though the turnaround time for reimbursements was longer than 
specified, dealership representatives told us that they benefited from 
the program. Specifically, all of the representatives we spoke with 
said that vehicle sales increased during the program. Representatives 
of one of the dealerships said that the program reduced existing 
vehicle inventories, which allowed them to order one million new 
vehicles. Moreover, according to these representatives, as well as 
representatives from the dealership association, the CARS program also 
contributed to vehicle sales involving consumers who did not 
participate in the program, though they did not have data to support 
this assertion. 

Used Vehicle Dealerships: 

Representatives we spoke with from a used vehicle dealer association 
and from dealerships that sell used vehicles in multiple states 
reported a mixed impact during the CARS program. Representatives from 
the association told us that demand remained neutral, while 
representatives of both dealerships told us that sales of used 
vehicles increased during the CARS program. In addition, according to 
the association representatives, as well as an industry analyst who 
tracks the wholesale market for used vehicles, new vehicle sales from 
the CARS program reduced the supply of certain new vehicle models, 
which then boosted sales and prices, particularly for comparable late-
model used vehicles. According to representatives from one of the 
dealerships, incentive programs like the CARS program increase sales 
of used vehicles because some consumers who want to participate in 
programs like these are unable to do so and, thus, purchase a used 
vehicle instead. Officials from the association added that prices for 
used vehicles ten years or older rose during the CARS program. One of 
the representatives cautioned, however, that it would be difficult to 
isolate the impact of the CARS program on used vehicle prices, because 
the economic recession was already contributing to a lower supply of 
and higher prices for used vehicles. Another industry organization we 
spoke with told us that the used vehicle market is complex because it 
involves sales transactions by franchise retailers, independent 
retailers, and private individuals and, thus, analyzing the impact of 
the CARS program on it is difficult. 

Charities: 

Similar to other stakeholders, representatives from charities with 
whom we spoke reported that the impact of the CARS program on 
charities was mixed. Although six of the seven charities we contacted 
reported that fewer vehicles were donated during and immediately 
following the CARS program than during the same period in 2008, they 
could not directly attribute the change to the CARS program. When 
asked to report the number of vehicles donated during July, August, 
and September 2009, the charities reported a range of experiences from 
a relatively small decrease from the same period in the previous year 
to a decrease of about half. In addition, several charities we 
contacted noted that other factors--such as the economic downturn, 
changes in tax law, and reductions in advertising expenditures--may 
have contributed to lower vehicle donations during the CARS program. 
NHTSA did not contact charities as part of its public outreach and 
consultation period during the design of the CARS program, but its 
report to Congress suggests that the CARS program may have temporarily 
and inadvertently reduced vehicle donations to charities. 

The CARS Program and Most Other Vehicle Retirement Programs Share Some 
Similarities, but Also Differences in Program Objectives, Eligibility 
Criteria, and Program Incentives: 

Although the CARS program and most other domestic and international 
vehicle retirement programs shared similarities, such as requiring 
that the trade-in vehicle be operational, differences existed in 
program objectives, eligibility criteria, and program incentives. For 
example, programs had varying eligibility criteria regarding the 
condition of the trade-in vehicle, the price of the new vehicle, and 
the income level of eligible program participants. Moreover, those 
programs used various incentives to encourage participation. See table 
2 for more information. 

Table 2: Domestic and International Vehicle Retirement Programs We 
Reviewed: 

Program location (state or country): United States; 
Program name: Consumer Assistance to Recycle and Save; 
Level of government: Federal; 
Incentives: $3,500 - $4,500; 
Vehicle eligibility criteria: Generally meet specified combined fuel 
economy thresholds; 
Vehicle replacement required?: Yes; 
$45,000 cap on manufacturer's suggested retail price; 
Budget: $3 billion (total); 
Program duration: July 2009 - August 2009. 

Other domestic programs: 

Program location (state or country): California; 
Program name: Consumer Assistance Program; 
Level of government: State; 
Incentives: $1,000; 
Vehicle eligibility criteria: Must fail biennial smog check; 
Vehicle replacement required?: No; 
Budget: $34 million (annual); 
Program duration: November 1998 - ongoing. 

Program location (state or country): California; 
Program name: Vehicle Buy Back Program; 
Level of government: Bay Area Air Quality Management District; 
Incentives: $1,000; 
Vehicle eligibility criteria: Model year 1989 or older; 
Vehicle replacement required?: No; 
Budget: $6.5 million (annual)[A]; 
Program duration: June 1996 - ongoing. 

Program location (state or country): California; 
Program name: Rule 1610; 
Level of government: South Coast Air Quality Management District; 
Incentives: Amount negotiated by vehicle disposal facility and 
consumer; 
Vehicle eligibility criteria: Officials project at least 3 years of 
remaining vehicle life; 
Vehicle replacement required?: No; 
Budget: Varies depending on incentive paid by vehicle disposal 
facility; 
Program duration: January 1993 - ongoing. 

Program location (state or country): California; 
Program name: High Emitter Repair or Scrap I; 
Level of government: South Coast Air Quality Management District; 
Incentives: $1,000 to scrap; 
an additional $1,000 for eligible low-income persons to purchase an 
eligible replacement vehicle; 
Vehicle eligibility criteria: Program identifies vehicle as a gross 
polluter via remote sensing; 
Vehicle replacement required?: No, but low-income eligible persons may 
receive a credit to purchase a replacement vehicle; 
Budget: $4 million (total)[B]; 
Program duration: June 2007 - April 2009. 

Program location (state or country): Texas; 
Program name: Drive a Clean Machine; 
Level of government: 16 participating counties; 
Incentives: $3,000 - $3,500 and only for eligible low-income persons; 
Vehicle eligibility criteria: 10 years or older; 
or failed emissions test; 
Vehicle replacement required?: Yes; 
$25,000 ceiling on sale price; 
Budget: $45 million (annual); 
Program duration: December 2007 - ongoing. 

International programs: 

Program location (state or country): Canada; 
Program name: Retire Your Ride; 
Level of government: Federal; 
Incentives: All participants may receive: $300 CAD and up to $3,000 
CAD instant rebates from select manufacturers;[C] Other incentives 
vary by province, such as vouchers for public transportation or 
bicycle purchase; 
Vehicle eligibility criteria: Model year 1995 or older; 
Vehicle replacement required?: No, but may include vehicle 
manufacturer credit to purchase a replacement vehicle; 
Budget: $92 million CAD[D]; 
Program duration: January 2009; set to end March 2011. 

Program location (state or country): Germany; 
Program name: Vehicle Scrappage Program (Abwrackprämie); 
Level of government: Federal; 
Incentives: 2,500 euros[E]; 
Vehicle eligibility criteria: Model year 9 years or older; 
Vehicle replacement required?: Yes; 
Budget: 5 billion euros[F]; 
Program duration: January 2009 - September 2009. 

Source: GAO. 

[A] This represents the budget for calendar year 2009; budget for 
calendar year 2010 was not known at the time of this report. 

[B] The entire allocated budget was not spent due to a reassessment of 
the program and low consumer participation. 

[C] As of April 8, 2010, these amounts convert to approximately $300 
and $2,996 in U.S. dollars, respectively. 

[D] As of April 8, 2010, this amount converts to approximately $91.87 
million in U.S. dollars. 

[E] As of April 8, 2010, this amount converts to approximately $3,341 
in U.S. dollars. 

[F] As of April 8, 2010, this amount converts to approximately $6.68 
billion in U.S. dollars. 

[End of table] 

Program Objectives: 

The international and domestic programs we reviewed had varying 
program objectives. Only Germany's vehicle retirement program shared 
the CARS program's objective of providing a stimulus to the economy. 
The CARS program and Germany's program also shared relatively short 
time frames of approximately two months and eight months respectively, 
compared to the other programs we reviewed, several of which have 
operated for more than 10 years. In addition, while one of the broad 
objectives of the CARS program was to put more fuel-efficient vehicles 
on the road, some other programs we reviewed may include different 
environmental objectives. For example, the county or district level 
programs we reviewed may also assist local areas in complying with 
state and federal air quality rules and regulations or reaching air 
quality attainment goals. 

Eligibility Criteria: 

Most of the vehicle retirement programs we reviewed required that the 
trade-in vehicle be operational and registered, but only the CARS 
program included combined fuel economy as a criterion for eligibility. 
Under the CARS program, both the trade-in and the new vehicle were 
generally required to meet specified combined fuel economy thresholds; 
however, no other domestic or international programs we reviewed 
incorporated such a requirement. Instead, other domestic and 
international programs used criteria such as the age of the trade-in 
vehicle or the trade-in vehicle's emissions, as measured by whether 
the vehicle had failed an emissions or smog check. Although the CARS 
program required that the trade-in vehicle have a maximum age of 25 
years, when vehicle age was used as an eligibility criterion in the 
other programs we reviewed, those programs required that the trade-in 
vehicle be at least 9 years old. Regulations or officials for most of 
these programs stated that this requirement reflects the fact that 
older vehicles emit higher levels of criteria pollutants into the air 
than newer vehicles. 

The CARS program and one other vehicle retirement program we reviewed 
placed a limit on the price for a new vehicle. Specifically, for new 
vehicles eligible for purchase or lease under the CARS program, the 
manufacturer's suggested retail price could not exceed $45,000. In 
addition, Texas' Drive a Clean Machine program caps the sale price of 
a new vehicle at $25,000. The only other program that required the 
purchase of a replacement vehicle, Germany's Vehicle Scrappage 
Program, did not place a price cap on the new vehicle eligible for 
purchase. 

Finally, although the CARS program did not include any income 
eligibility requirements, other domestic programs we reviewed limited 
participation or made certain incentives available only to low-income 
persons. Specifically, only residents who meet statutorily defined 
household income limits are eligible to participate in the Texas 
program. For example, for a household of four people, the maximum net 
income ceiling was $66,150 in 2009. In California, a vehicle 
retirement program administered by the South Coast Air Quality 
Management District provided an additional $1,000 to consumers who met 
California's low-income guidelines when those consumers retired their 
vehicle and replaced it with an eligible used vehicle. 

Program Incentives: 

The vehicle retirement programs we reviewed used a variety of monetary 
incentives to encourage participation. The CARS program offered the 
highest monetary incentive, paying consumers an average credit of 
$4,209, according to NHTSA's report to Congress. The other programs we 
reviewed paid incentives that ranged between approximately $300 and 
$3,500. Moreover, governments may partner with the private sector to 
offer additional monetary incentives to encourage consumer 
participation in their vehicle retirement programs. For example, in 
Canada, the government offers a monetary incentive as part of its 
vehicle retirement program and select automobile manufacturers provide 
instant rebates of up to $3,000. Canada's program also offers 
participants vouchers for public transportation or the purchase of a 
bicycle as an incentive for retiring their vehicles. The CARS program 
did not offer similar incentives. 

Concluding Observations: 

The implementation and results of the CARS program offer potential 
lessons learned for future vehicle retirement or similar incentive 
programs. First, the program produced economic and environmental 
benefits, achieving its broad objectives. However, the extent of the 
program's effects is uncertain. Second, before a program is underway, 
steps must be taken to determine what impacts are going to be measured 
and what data will be required to measure them. Moreover, steps must 
be taken to ensure that the data are reliable. NHTSA relied heavily on 
the consumer survey for data on the economic and environmental 
benefits of the CARS program. However, there is a potential risk to 
the reliability of estimates based on this survey data, because NHTSA 
did not follow some generally accepted survey design and 
implementation practices, largely because it had limited time to 
establish and administer the program. Finally, given the number of 
stakeholders that are financially affected by the auto industry, it 
would be important to collect and consider information on how a future 
program would affect these stakeholders and take mitigating actions, 
as appropriate. 

Agency Comments and Our Evaluation: 

We provided a copy of a draft of this report to DOT for review and 
comment. On April 1, 2010, we met with DOT officials to obtain their 
oral comments on the draft report. DOT officials stressed the economic 
and environmental successes of the CARS program, which the agency 
explained in detail in its December 2009 report to Congress. 
Specifically, officials stated that the program boosted vehicle sales 
and noted that there was almost a 60 percent improvement in the fuel- 
efficiency of vehicles purchased or leased under the program. With 
regard to our findings on NHTSA's consumer survey and related 
conclusions, DOT officials noted that the agency had very limited time 
to design and implement the survey and, therefore, OMB approved an 
abbreviated approach to survey design and implementation practices, 
such as pretesting and follow-up efforts with CARS participants. 
Nonetheless, the officials stated that, based on subsequent analysis, 
they believe that the survey results provide reliable information on 
the impacts of the program. We agree that NHTSA faced enormous 
challenges in meeting the program's statutory requirements, including 
the CARS Act's requirement that NHTSA publish the program's final 
implementing regulations within 30 days of enactment. Although the 
draft report recognized the limited time frames that NHTSA was working 
under, we included additional language in the final report about these 
time frames. However, we did not change our findings on NHTSA's 
consumer survey as we continue to believe that following generally 
accepted survey design and implementation practices is important to 
ensuring the reliability of estimates based on survey results. DOT 
officials also provided additional technical comments, including 
comments on NHTSA's "pull forward" analysis and on the energy consumed 
and emissions produced to manufacture new vehicles and prematurely 
dispose of trade-in vehicles as a result of the program, which we 
incorporated, as appropriate. 

We also provided a copy of a draft of this report to EPA for review 
and comment. EPA provided two technical clarifications via email, 
which we incorporated, as appropriate. 

We are sending copies of this report to other interested congressional 
committees and members, the Secretary of Transportation, and the EPA 
Administrator. The report also is available at no charge on the GAO 
Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact A. Nicole Clowers at (202) 512-2834 or clowersa@gao.gov. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. GAO staff who 
made major contributions to this report are listed in appendix III. 

Signed by: 

A. Nicole Clowers, Acting Director: 
Physical Infrastructure Issues: 

[End of section] 

Appendix I: Scope and Methodology: 

Our work focused on the impact of the Consumer Assistance to Recycle 
and Save (CARS) program. In particular, we focused on: (1) what is 
known to date about the extent to which the CARS program achieved its 
objectives; (2) what stakeholders' experiences were with the CARS 
program; and (3) how the CARS program compares to other selected 
domestic and international vehicle retirement programs. Our scope was 
limited by the extent to which CARS program data were available at the 
time of our review. 

To assess the objectives of the CARS program, we reviewed federal 
legislation, including the CARS Act and the supplemental 
appropriations act, CARS program's implementing regulations, the 
National Highway Traffic Safety Administration's (NHTSA) regulatory 
analysis of the CARS program, NHTSA's report to Congress on the CARS 
program, and press releases of members of Congress and statements by 
administration officials, and other reports issued by federal entities 
such as the Congressional Research Service, the Congressional Budget 
Office, and the Council of Economic Advisers. We also conducted a 
literature review of other evaluations of the CARS program from auto 
industry experts and academics. In addition, we reviewed data from 
NHTSA on the CARS program, as well as data from the Bureau of Economic 
Analysis. We further reviewed guidance on survey design and 
implementation from the Office of Management and Budget. We 
interviewed NHTSA officials about the CARS program and officials at 
the Department of Transportation Office of Inspector General about its 
review of the CARS program and contacts to its hotline complaint 
center about the program. We also interviewed officials from the 
Environmental Protection Agency, representatives of organizations from 
different sectors of the auto industry, and representatives of an 
organization focused on fuel-efficiency and environmental issues, and 
academic experts who prepared environmental evaluations of the CARS 
program. 

To determine stakeholders' experiences with the CARS program, we first 
conducted a literature review to identify program stakeholders. 
Through this review, we identified the following groups as 
stakeholders: consumers, the scrap and salvage industries, 
manufacturers, eligible vehicle dealerships, and used vehicle 
dealerships, and charities. We contacted representatives from each of 
these groups. Specifically, for consumers, we spoke with 
representatives of consumer groups and Department of Transportation 
Inspector General officials about contacts from consumers about the 
CARS program; for scrap and salvage industries, we spoke with 
representatives from a scrap recycling industry association, an 
automotive recycling industry association, and a scrap recycling 
facility; for manufacturers, we spoke with associations representing 
automobile manufacturers and contacted representatives of automobile 
manufacturers that produced the top 8 vehicle makes purchased or 
leased under the CARS program; for eligible dealerships, we spoke with 
representatives of a new vehicle dealership association and two 
dealerships; and for used vehicle dealerships, we spoke with 
representatives of a used vehicle and independent dealership 
association, two dealerships, and organizations that provide analysis 
of the used vehicle market. We also contacted and received information 
from representatives of 7 charities that operate vehicle donation 
programs. We selected these charities based on a review of previous 
GAO reports from 2003 and 2008 on vehicle donations to charities. The 
2003 report identified 65 charities that operate vehicle donation 
programs. From this list we identified the top 10 charities by net 
proceeds from the vehicle donation program and the top 10 charities by 
the number of vehicles donated. We then selected the 7 charities that 
were on both top 10 lists for our review. 

To understand how the CARS program compares to other domestic and 
international vehicle retirement programs, we identified states and 
countries through a literature review and interviews with government 
and industry officials. To select which other programs to review as 
part of our study, we used the following criteria: the program was 
ongoing or recently completed; it was consulted by NHTSA officials 
during the development of the CARS program's implementing regulations; 
or was cited by officials we spoke with as worthy of review. Based on 
these criteria, we selected seven programs in four locations 
(California, Texas, Canada, and Germany) to review (see table 3 for 
additional information). We conducted in-depth interviews with 
officials from these programs via phone or in-person meetings and 
reviewed program documentation on areas such as the programs' 
eligibility criteria and program incentives. In addition, we visited 
officials at the European Commission in Belgium to obtain an in-depth 
understanding of their evaluation of vehicle retirement programs in 
Europe. While in Belgium we interviewed an official representing a 
European automobile manufacturers' association and, by phone, 
representatives of a German manufacturers' association and a United 
Kingdom manufacturers' association, who were knowledgeable about 
vehicle retirement programs in Germany and the United Kingdom. 

Table 3: Domestic and International Vehicle Retirement Programs We 
Reviewed: 

Program location (state or country): California; 
Program name: Consumer Assistance Program. 

Program location (state or country): California; 
Program name: Vehicle Buy Back Program. 

Program location (state or country): California; 
Program name: Rule 1610. 

Program location (state or country): California; 
Program name: High Emitter Repair or Scrap I. 

Program location (state or country): Texas; 
Program name: Drive a Clean Machine. 

Program location (state or country): Canada; 
Program name: Retire Your Ride. 

Program location (state or country): Germany; 
Program name: Vehicle Scrappage Program (Abwrackprämie). 

Source: GAO. 

[End of table] 

We conducted this performance audit from September 2009 through April 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: GAO's Analysis of the CARS Program's Consumer Survey: 

NHTSA designed a consumer survey to collect data on what consumers who 
participated in the CARS program would have done in the absence of the 
program. However, largely because NHTSA had limited time to establish 
and administer the program, the agency did not follow some generally 
accepted survey design and implementation practices, thereby posing a 
potential risk to the reliability of estimates based on the survey 
data. We identified areas of data collection, data processing and data 
analysis, and survey design that NHTSA omitted. 

According to CARS program's implementing regulations, dealers were 
instructed to distribute the survey to participating consumers for 
completion and were requested to attach a completed consumer survey to 
each application for reimbursement submitted to NHTSA. Although 
consumers were not required to respond to the survey, dealers were 
instructed to return the survey marked "declined" if the consumer 
chose not to respond. NHTSA officials reported that the agency 
expected approximately 75 percent of consumers to respond. However, 
according to NHTSA's report to Congress, of the 677,842 paid 
transactions under the CARS program at the time of the report, a total 
of 185,342 consumer surveys were submitted, for an overall response 
rate of 27 percent. NHTSA officials reported that the agency 
subsequently omitted 41,344 surveys, or 22 percent of submitted 
surveys, because they were incomplete or incorrect (27,623), blank 
(2,579), duplicate (4,939), invalid (3,859), or did not match the 
transaction (2,344). After omitting these surveys from the total 
submitted, the valid response rate was reduced to 21 percent. 

NHTSA did not follow recommended data collection procedures when it 
did not follow up with nonrespondents to increase the survey response 
rate and identify reasons for nonresponse. The survey response rate is 
generally considered to be one indication of the quality of survey 
data. According to Office of Management and Budget (OMB) guidance, 
agencies should, as part of their data collection methodology, develop 
procedures to monitor how survey data are collected, including 
strategies to correct identified problems.[Footnote 26] For example, 
OMB guidance suggests that agencies have reporting systems that 
provide timely information about survey response rates and the reasons 
for nonresponse. Further, when response rates are low, OMB recommends 
follow-up with a subset of nonrespondents, which would allow for some 
understanding of differences between respondents and nonrespondents. 
According to NHTSA officials, they became concerned that many dealers 
were not offering the survey to consumers as required in the CARS 
program's implementing regulations. Although NHTSA did not conduct any 
follow-up efforts with consumers to increase the response rate and 
identify reasons for nonresponse, it did contact a dealership 
association to assist in encouraging more dealers to distribute the 
survey. NHTSA stated that the tight schedule for the issuance of its 
report to Congress mandated in the program's authorizing legislation 
made conducting follow-up efforts with nonrespondents impractical. 

NHTSA also did not follow recommended data analysis procedures when it 
did not conduct a nonresponse bias analysis on all survey items used 
in its analysis before publishing its report to Congress. To better 
understand the potential for bias caused by nonresponse, OMB guidance 
suggests that nonresponse bias analysis should be planned for or 
conducted if the expected or actual response rate for a particular 
survey item is below 70 percent. According to NHTSA's report to 
Congress, the agency compared survey respondents to nonrespondents on 
the basis of location, Manufacturer's Suggested Retail Price, odometer 
reading, trade-in vehicle age, credit amount, and new vehicle combined 
fuel economy, and found that respondents and nonrespondents were 
similar for these items. However, when NHTSA reduced the number of 
surveys from 143,998 (21 percent) to 88,286 (13 percent) for purposes 
of its analysis of the impact of the CARS program on fuel consumption 
and emissions, it did not conduct a similar comparison for this 
reduced sample before publishing its report. NHTSA reduced the number 
of surveys by eliminating the surveys submitted by consumers who 
responded that they would not have replaced their vehicle 
(approximately 35 percent of survey respondents). The report states 
that these surveys were eliminated because there was no alternate 
replacement vehicle that would have been purchased in the absence of 
the CARS program with which to compare their actual purchase under the 
CARS program. Although the agency did not conduct a nonresponse bias 
analysis on the reduced sample before the report to Congress was 
published, in response to GAO questions about whether a nonresponse 
bias analysis was conducted on the reduced sample, NHTSA subsequently 
conducted such an analysis on the reduced sample comparing respondents 
to those who did not respond on the basis of Manufacturer's Suggested 
Retail Price, trade-in vehicle age, credit amount, new vehicle 
combined fuel economy and odometer reading, and found that 
nonrespondents and respondents were similar. 

NHTSA did not perform a key recommended survey design practice. 
Specifically, OMB guidance states that agencies must test surveys 
before they are distributed--a process known as pretesting--through, 
for example, the use of cognitive testing, focus groups, or field 
tests. NHTSA officials told us that due to the condensed time frame to 
establish the program, they were unable to perform a formal pretest of 
the survey, but stated they performed an informal pretest of the 
survey involving three staff members not involved in designing the 
survey to allow for feedback on the survey's structure and clarity. We 
have found that pretesting helps ensure that the survey: 

* actually communicates what it was intended to communicate; 

* is standardized and will be uniformly interpreted by survey 
respondents; and: 

* will be free of design flaws that could lead to inaccurate answers. 

In addition to helping ensure the clarity of the questions, we found 
that pretesting can indicate when there is a low likelihood of 
obtaining accurate factual data from survey responses. NHTSA's 
consumer survey included factual questions. For example, the survey 
asked consumers the number of miles they drove the traded-in vehicle 
during the past 12 months. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

A. Nicole Clowers, (202) 512-2834 or clowersa@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Raymond Sendejas, Assistant 
Director; William Colwell; Elizabeth Eisenstadt; Lorraine Ettaro; 
Timothy Guinane; Terence Lam; James Leonard; Nancy Lueke; Susan Michal-
Smith; Amanda Miller; Tina Won Sherman; and Crystal Wesco made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] In December 2008, the Automotive Industry Financing Program was 
established under the Troubled Asset Relief Program (TARP). Through 
the Automotive Industry Financing Program, the Department of Treasury 
provided about $67 billion to help Chrysler and GM continue operating 
as the companies restructured. In exchange for the funding it 
provided, the Department of Treasury received 9.85 percent equity in 
the new Chrysler, 60.8 percent equity and $2.1 billion in preferred 
stock in the new GM, and about $13.8 billion in debt obligations 
between the two companies. For more information on the Automotive 
Industry Financing Program, see GAO, Troubled Asset Relief Program: 
Continued Stewardship Needed as Treasury Develops Strategies for 
Monitoring and Divesting Financial Interests in Chrysler and GM, GAO-
10-151 (Washington, D.C.: Nov. 2, 2009). 

[2] 42 U.S.C §17013. 

[3] Consumer Assistance to Recycle and Save Act of 2009, Pub. L. No. 
111-32, tit. XIII, 123 Stat. 1859, 1909-1915 (June 24, 2009). 

[4] NHTSA's primary mission is to save lives, prevent injuries, and 
reduce economic costs due to road traffic crashes through education, 
research, safety standards, and enforcement activity. 

[5] Consumer Assistance to Recycle and Save Program, Supplemental 
Appropriations, Pub. L. No. 111-47, 123 Stat. 1972 (Aug. 7, 2009). 
This funding was transferred from the amount made available for the 
Department of Energy's Innovative Technology Loan Guarantee Program in 
the American Recovery and Reinvestment Act of 2009. Pub. L. No. 111-5, 
123 Stat. 115 (Feb. 17, 2009). 

[6] Congressional Research Service, Accelerated Vehicle Retirement for 
Fuel Economy: "Cash for Clunkers," R40654 (Aug. 10, 2009); and A Clean 
Air Option: Cash for Clunkers, 96-766 ENR40654 (Sept. 16, 1996). 

[7] For information on the DOT Office of Inspector General, see 
[hyperlink, http://www.oig.dot.gov]. 

[8] According to the CARS program's final implementing regulations, 
combined fuel economy is an Environmental Protection Agency (EPA) 
calculation representing the weighted average of a vehicle's city and 
highway fuel economy as determined by the method described in EPA 
implementing regulations at 40 CFR 600.210-08(c). 

[9] Requirements and Procedures for Consumer Assistance to Recycle and 
Save Program, 74 Fed. Reg. 37878, 37884 (July 29, 2009). 

[10] Disposal facility means a facility listed as eligible to receive 
a trade-in vehicle for crushing or shredding under the CARS program, 
except in the case of a U.S. territory. These disposal facilities 
include (1) salvage facilities--also referred to as automotive 
recyclers or salvage yards--which recycle automotive parts for reuse 
and (2) scrap facilities--also referred to as scrap recycling 
facilities--which shred the vehicles and recycle some of the remaining 
materials. 

[11] 74 Fed. Reg. 38974 (Aug. 5, 2009); 75 Fed Reg. 5248 (Feb. 2, 
2010). 

[12] NHTSA, Consumer Assistance to Recycle and Save Act of 2009, 
Report to the House Committee on Energy and Commerce, the Senate 
Committee on Commerce, Science, and Transportation and the House and 
Senate Committees on Appropriations (Dec. 2009) [hyperlink, 
http://www.cars.gov/files/official-information/CARS-Report-to-
Congress.pdf]. 

[13] DOT's modal administrations are the departmental units 
responsible for the different modes of transportation. 

[14] In addition to the 677,842 transactions NHTSA found in its report 
to Congress, NHTSA officials said an additional 401 transactions were 
paid as of March 15, 2010, and decisions on another 22 transactions 
were pending. 

[15] We reviewed the program's authorizing legislation and the 
supplemental appropriations act; however, we did not identify anything 
in these laws that stated the explicit purposes or objectives of the 
CARS Program. Therefore, we examined statements, press releases, and 
program documents, including the program's implementing regulations, 
to identify the program's broad objectives. More specific objectives 
could lead to a better cost-benefit analysis of a program. 

[16] 74 Fed. Reg. 37894. 

[17] CEA determined its estimate by using the approximately 690,000 
applications submitted for review to NHTSA at the time CEA performed 
its analysis. CEA estimated vehicle sales based on pessimistic, 
baseline, and optimistic scenarios. CEA's estimate of approximately 
440,000 incremental vehicle sales is based on its baseline scenario. 

[18] Because this study was published close to the issuance of our 
report, we were unable to fully review its methodology. 

[19] Specifically, CEA estimated how vehicle sales changed following 
two other incentive programs: zero percent financing in 2001 and 
employee discount pricing in 2005. CEA's analysis found that sales 
dropped a statistically insignificant amount after the 2001 program, 
but dropped a statistically significant amount after the 2005 program. 
CEA also reviewed the experiences from similar programs in other 
countries, but found no clear patterns in the post-program periods in 
those countries. These results led CEA to determine the experiences of 
these programs could not be used to reliably determine how sales would 
behave in the month following the CARS program. 

[20] The impact of the reduction in inventory on automobile 
manufacturing is not clear because information is unavailable on the 
extent to which vehicles sold from existing inventories were replaced 
with newly manufactured vehicles. 

[21] CEA estimated employment impact based on pessimistic, baseline, 
and optimistic scenarios of how many incremental sales the CARS 
program would generate. CEA based its estimates on job-years created 
or saved by the program. For example, CEA's baseline scenario 
estimated that 35,000 job-years were created by the program in 2009, 
that is, hours of employment will be created that correspond to the 
hours associated with about 35,000 full-time year-round jobs. Since 
all of these jobs are concentrated in the second half of the year; the 
actual number of jobs would be about 70,000 in the second half of 
2009. While NHTSA acknowledged that the longevity of job creation from 
the program is uncertain, the agency did not define a "job" for the 
purpose of its analysis. 

[22] The primary greenhouse gases associated with a vehicle are carbon 
dioxide, methane, and nitrous oxide. Vehicles also emit a number of 
harmful pollutants including criteria pollutants such as carbon 
monoxide, nitrogen oxides, sulfur dioxide, particulate matter, and 
ozone. 

[23] According to one study we reviewed, the "use phase" encompasses 
all activities from the delivery of the new vehicle to the dealership 
to the last mile traveled by the vehicle, including: dealership sales, 
vehicle operation and storage, routine service and maintenance, and 
unscheduled service. 

[24] Consumers may also benefit from additional safety improvements in 
the new vehicle purchased or leased under the program. According to 
NHTSA's report to Congress, any safety improvements added to the fleet 
since the model year of the trade-in vehicle are benefits attributable 
to the program. Specifically, the report states that sales of new 
vehicles under the CARS program will accelerate the presence of, among 
other things, braking improvements and advanced air bags, some of 
which can significantly reduce the likelihood of fatal crashes or 
injuries in crashes. However, the report noted that the CARS program 
resulted in the replacement of many larger vehicles with smaller 
passenger cars. It stated that although modern vehicles of all sizes 
are much safer than older vehicles, occupants of smaller vehicles tend 
to be more vulnerable in certain crash situations, which could offset 
some of the increase in the safety of the on-road fleet. 

[25] This includes the supplemental $2 billion appropriation the CARS 
program received from Congress in August 2009. Pub. L. No. 111-47. 

[26] See Office of Management and Budget Standards and Guidelines for 
Statistical Surveys (September 2006), which documents the professional 
principles and practices that federal agencies are required to adhere 
to and the level of quality and effort expected in statistical 
activities. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Phone: 

The price of each GAO publication reflects GAO’s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO’s Web site, 
[hyperlink, http://www.gao.gov/ordering.htm]. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional 
information. 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: fraudnet@gao.gov: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, dawnr@gao.gov: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, youngc1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: