In Vehicular Ad Hoc Networks (VANETs), vehicles along highways can be grouped into clusters. The design of VANET clusters (i.e., size and geographical span) depends on the packet collision in MAC layer, the wireless channel conditions in PHY layer, and the mobility of the vehicles. Existing works investigated these effects separately. In this paper, we present a comprehensive analysis that combines these three important factors into one model. In particular, we model an unsaturated VANET cluster with a Markov chain by introducing an idle state. The wireless channel fading and vehicle mobility are integrated by explicitly deriving the joint distribution of inter-vehicle distances. Closed-form expressions of network performance measures, i.e., packet loss probability and system throughput, are derived. The proposed analytic model, validated by simulations, is able to accurately characterize VANET performance. Our model can be applied to the design of VANET clusters, and reveals a number of insights that provide guidelines for VANETs design and management.