Car Dealers, Car Buyers, and Cash for Clunkers July 24 2009

To find out whether your car qualifies for a Cash for Clunkers rebate and to explore new car options, use this fueleconomy.gov website: http://www.fueleconomy.gov/feg/CarsSearchIntro.shtml

The fueleconomy.gov website will tell you the voucher value of a trade in. However, it does not tell you the value of your gas savings. This post focuses on the value of the gas savings from a Cash for Clunkers trade in.

Car buyers: The gas savings from your trade in can be more valuable than the voucher itself. MPG is a misleading indicator of gas savings: Replacing a 14 MPG car with a 25 MPG car will save more gas than any possible improvement to a 33 MPG car (for example, 300 gallons over 10,000 miles of driving).

Car dealers: We encourage you to have "GPM" tools available for car buyers when they trade in their Clunkers so that car buyers can see their gas (and cost) savings.

The GPM tools on this website will give you an accurate picture of the gas savings from a Cash for Clunkers trade in. Here are 3 tools that help calculate gas savings:

1) The GPM calculator, www.gpmcalculator.com, will let you choose different levels of MPG (or specific cars) and compare the gas consumption of those vehicles for a distance of your choice (100 miles, 12,000 miles, 100,000 miles).

2) The following table let's you quickly compare the gas consumption (gallons per 100 miles) and gas cost savings (over 10,000 miles). The table assumes that gas is $2.50 a gallon. (To see the effect of different gas prices, use the GPM calculator above.) Click here for a downloadable pdf.

MPG	Gallons per 100 Miles	Gas Costs to Drive 10,000 Miles
10	10.0	$2,500
11	9.1	$2,273
12	8.3	$2,083
13	7.7	$1,923
14	7.1	$1,786
15	6.7	$1,667
16	6.3	$1,563
17	5.9	$1,471
18	5.6	$1,389
19	5.3	$1,316
20	5.0	$1,250
21	4.8	$1,190
22	4.5	$1,136
23	4.3	$1,087
24	4.2	$1,042
25	4.0	$1,000
26	3.8	$962
27	3.7	$926
28	3.6	$893
29	3.4	$862
30	3.3	$833
31	3.2	$806
32	3.1	$781
33	3.0	$758
34	2.9	$735
35	2.9	$714
36	2.8	$694
37	2.7	$676
38	2.6	$658
39	2.6	$641
40	2.5	$625
41	2.4	$610
42	2.4	$595
43	2.3	$581
44	2.3	$568
45	2.2	$556
46	2.2	$543
47	2.1	$532
48	2.1	$521
49	2.0	$510
50	2.0	$500

3) This document contains two tables that directly calculate the gas (page 1) and cost (page 2) savings of different trade ins. Look in the top row for the MPG of your original vehicle; look in the left side column for the MPG of a new vehicle. Table 2 assumes that gas is $2.50 a gallon. (To see the effect of different gas prices, use the GPM calculator above.)

[The Sierra Club and the American Council for an Energy-Efficienct Economy have developed an online gas savings calculator similar to these tables. You can find it here. It assumes 2 possible prices of gas--current and $4 per gallon.]

WYPR Midday with Dan Rodricks: Cash for Clunkers and GPHM

Dan Rodricks of WYPR in Baltimore reviewed the details and merits of the Cash for Clunkers program on his July 27 broadcast. He invited me to join him to talk about the implications of "Gallons per Mile" for Cash for Clunkers. Here's the link to the broadcast.

In a nutshell:

1) Gallons per mile makes clear that national policy should focus on improving the fuel efficiency of the most inefficient cars, suvs, and trucks. The following table shows the gas consumption (per 100 miles) for different levels of mpg:

10 mpg = 10 gallons per 100 miles (gphm)
11 mpg = 9 gphm
12.5 mpg = 8 gphm
14 mpg = 7 gphm
16.5 mpg= 6 gphm
20 mpg = 5 gphm
25 mpg = 4 gphm
33 mpg = 3 gphm
50 mpg = 2 gphm

Thus, improvements of even 1 or 2 mpg in the "teens" can save about a gallon every 100 miles. That translates to 100 gallons every 10,000 miles, or one ton of carbon. That is the same amount of gas (and carbon) saved by replacing a 33 mpg car with a 50 mpg car. In fact, replacing a 14 mpg car with a 25 mpg car saves more gas (3 gallons per 100 miles) than any possible improvement on a 33 mpg car.

Cash for Clunkers makes sense because it focuses on cars in the "teens".

2) GPM helps car buyers see the true value of a Cash for Clunkers trade in. The voucher is only half the story; the other half is the value of the gas savings. Thus, GPM tools, like the GPM calculator at www.gpmcalculator.com, are essential for car dealers and car buyers during the trade in process: Know your gas savings!

3) And, in the long term, any number of policy decisions would be easier if the country adopted "gallons per hundred miles" (GPHM) to talk about fuel economy. Why? The things we care about as a country--carbon emissions, gas consumption, and personal gas costs--are a direct function of "GPHM", but not of MPG. It's as simple as: GPM can be subtracted to know gas savings; MPG cannot.

The CAFE increases in the spring were misinterpreted at times because major news outlets translated "mileage increases" directly to carbon reduction.

If you are interested in trading in a car in the Cash for Clunkers program, be sure to check the size and value of your gas savings at this post. The gas savings can be worth as much as the voucher.

Cash for Clunkers has yielded a 69% increase in MPG?

[If you are interested in trading in a car in the Cash for Clunkers program, be sure to check the size and value of your gas savings at this post. The gas savings can be worth as much as the voucher. DOT has released more detailed numbers about cars sold and bought, and this August 5 post analyzes the benefits so far of Cash for Clunkers.]

There is a story that has received a lot of attention in the last 2 days stating that early trade ins in the Cash for Clunkers program have reaped a 69% improvement over the original "clunker."

Here's the press release: http://www.webwire.com/ViewPressRel.asp?aId=100063

It's an encouraging number if true. (Of course, in terms of reduction in gas consumption, the percentage translates to 40% as spelled out here.)

However, until the organization produces more concrete numbers, we have to worry that they took straight averages of MPG across vehicles without actually calculating the harmonic mean, i.e., converting all cars to GPM before MPG, as done in the CAFE calculations.

Why does it matter? Let's create a simple scenario:

• The average clunker trade in gets 16mpg
• The average new vehicle gets 27mpg

11 divided by 16 represents a 69% increase over the original MPG. Let's assume two 16 MPG cars were turned in, one for a 20 MPG car and the other for a 34 MPG car. The average MPG appears to be 27 MPG. However, the actual MPG of the two new cars is 2/(1/20 + 1/34), or 25 MPG. A good improvement, but not a 69% improvement; it's a 56% improvement.

The harmonic mean keeps very efficient cars from incorrectly inflating the overall MPG.

Popular Mechanics Adds GPHM

Popular Mechanics has joined USA Today in offering gallons per hundred miles (GPHM) in its car reviews. Popular Mechanics included g/100m as one of "25 Bold Ideas" in their July issue.

The July 16 post ends, "The difference in the mpg ratings doesn't reflect the actual difference in fuel consumption the way that gallons/100 miles does, pure and simple. And that's why PM is starting to report fuel economy this way on its recent test drives. Pointedly, the EPA should promote this system too. Sure, it's trivial to calculate the difference, but with the current emphasis that car manufacturers, government agencies and consumers are placing on fuel economy, we need to change our way of thinking from high mileage to low consumption. "

If you are interested in learning more about gas savings from a trade in, please go to this May 29 post.