Empty car showroom

If the National Highway Traffic Safety Administration makes its proposed 2025 fuel economy standards official, cars are going to be more expensive, and that's going to shut millions of buyers out, argues the National Automobile Dealers Association. "If the price of a vehicle goes up by the government estimate of almost $3,000," says David Wagner, an analyst for the NADA Used Car Guide, "millions of people will no longer be able to finance a new vehicle." The proposed standard is aiming for an average of 54.5 mpg for both cars and trucks by 2025, and is predicted to add $2,000 to the cost of a vehicle. Add to that the $1,000 or so that's going to be added to the price of vehicles as the current fuel economy requirements phase-in between now and 2016, and the $30,000 average price of a new car rises to the point where lower income buyers may not be able to qualify for financing.

If that happens, the net effect would be a reduction in the buyer pool for the more fuel efficient, cleaner cars these fuel economy regulations are intended to create. While the increased fuel efficiency is estimated to save average owners of $8,000 over the life of the vehicle (offsetting the higher monthly payments), if people can't afford the payments or secure lending, the total ownership cost will be a moot point. "Disregarding vehicle affordability will undermine the environmental and national security benefits the administration is seeking," says Doug Greenhaus, chief regulatory counsel for environment, health, and safety for NADA.

The government's 2017-2025 rules aren't yet final, and Grenhaus and NADA suggest the Obama Administration and NHTSA study the impact the rules will have on buyers before moving forward.