No offense to Uncle Sam, but government programs aren’t supposed to work this well.

Amidst a variety of other, less successful projects outlined in President Obama’s 2009 economic recovery package, the US government’s Cash for Clunkers program, in which car owners sell their gas guzzlers for a $4,500 (max.) credit toward a more environmentally friendly new car, has caught fire. Although the program only officially began on July 16, it has already exhausted its $1 billion allocation. Auto dealers estimate that 250,000 new cars have been sold through the program, and more funds are already being approved by Congress to ensure that America’s newfound source for economic activity keeps churning.

For all of the noise made about Cash for Clunkers, one would imagine Obama and Co. are offering consumers everything but a Rolex for the value of their trade-in vehicle. Most interestingly, however, many cars qualifying for a government credit are worth significantly more money in the average buyer’s market.

A few examples leave the point relatively clear. A personal favorite of mine involves my family’s 1998 Dodge Durango. By all accounts, our V-8 equipped, gas-belching off-roader makes the grade for the trade-in program. Cash for Clunkers requires eligible trade-in vehicles to average no better than 18 miles per gallon in overall fuel economy (city and highway). The Durango can at best manage a gluttonous thirteen combined mpgs. Less efficient than your average Toyota Prius? Check. Furthermore, Chrysler Inc., Dodge’s parent company, is currently mired in Chapter 11 bankruptcy, so resell values for most Dodge products are at all-time lows. Chrysler products have not traditionally been known to hold their value well in the first place, so one can imagine the fear someone in my position might have trying to sell a ten year old Durango to a nearby dealership or independent buyer. Yet despite all of the incentives to run to a federally guaranteed $3,000-$4,500 and cut the losses of selling our Durango, a quick search of local selling prices reveals our family could bag an average $6,000 by unloading it on our own. Comparing this money against a trade with Uncle Sam, we could be gaining $1,500 dollars in resell money at a minimum.

A ’98 Durango isn’t the only model highlighting a public/private value discrepancy with Cash for Clunkers, either. A 2001 Ford Mustang GT Bullitt edition sells for roughly $5,500 in the current used-car market, according to a recent CNN auto article. 2000 year model F-150s Supercab trucks still command nearly $9,500 on the auto block with odometers reading over 100,000 miles logged. Even a 1997 Nissan Pathfinder SUV with 150,000 miles can sell for roughly $6,500. Particularly for a large number of SUVs and trucks, the models most frequently traded in under the “Cash for Clunkers” program, local market rates can offer sellers more buck for their product. Significantly more.

Nevertheless, drivers have been filling out government Cash for Clunkers applications at a breakneck pace. Why the sudden penchant for government backed credits?

An economist would probably reference the Cash for Clunkers benefit of costing the consumer less time and energy. The time spent propagating “For Sale” ads and arranging meetings with potential buyers should theoretically account for the extra $1,000 or so made in the average private sale. This may be so, but I believe greater forces are at work.

First, as an important consideration, “Cash for Clunkers” does serve as the best trade-in solution for a number of older cars. Vehicles such as mid-1990s Lincoln Town Cars and Cadillac Sevilles average paltry fuel mileage figures and only $2,500 in current consumer trade-ins. In general, cars over fifteen years old have depreciated to the point where little extra value stands to be gained through an independent sale.

However, amidst the hysteria of American economic revival efforts and the campaign to sell all things “green” as the new black, American car owners appear to be overlooking their real ally in the current car market: the local buyer. The ravenous demand for federally funded trade-ins is fueled not merely by the extra utility of free time, but by the ignorance of better alternatives as well. If the average car owner were fully aware of the value of his or her trade-in, I would envision far fewer late 90s light trucks, SUVs, and sedans heading for the junkyard.

Establishing a “greener” planet by impounding clunkers is often raised as a second incentive for Cash for Clunkers, but I’m skeptical that one would readily forego an extra thousand bucks just for the satisfaction of taking a polluting car off the road. Environmental motivations likely underlie a portion of the program’s success, but I think most Americans just don’t understand the deal they’re getting.

Without a doubt, Cash for Clunkers has been an overwhelming success. Demand for cars is finally showing positive signs in the American market. Ford posted its first monthly sales increase in 19 months this July, thanks largely to clunker-fueled Focus sales. When our Durango reaches the end of its run, however, I will be going to the local buyers’ market first. A little extra in the wallet goes a long way toward making a more eco-friendly vehicle a reality for the average driver.