Car purchases generated by "Cash for Clunkers" will cost taxpayers $20,000 each

The "Cash for Clunkers" program gives new car and truck buyers $3500 to $4500 for each vehicle turned in if they meet certain requirements. However, respected car site Edmunds.com has determined each additional vehicle purchased under this program will actually cost taxpayers $20,000. How is this? Many "clunkers are already traded in every month. We will be paying for these even though they don't stimulate an additional new car sales.

From Business Week:

Edmunds.com, which is benefitting from all the extra site traffic generated by CARS nonetheless issued a report Monday saying that each car bought under the progream would actually cost the U.S. tax-payer $20,000 per vehicle sold, not the $3.500-$4,500 actually paid out.

Edmunds figures that CARS will only help drive about 50,000 incremental new car sales. How is this possible? Edmunds.com’s research shows that typically 200,000 vehicles worth less than $4,500 are traded in for new vehicles every three months. At best the current Cash for Clunkers program will fund 250,000 such transactions in the same time period—a gain of only 50,000 vehicles, says the company. Given that this program is budgeted to cost $1,000,000,000, this increase will come at the cost of $20,000 per extra sale. (accent is mine)