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.


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  • 161 Comments
      MaM
      • 2 Years Ago
      NADA saying the mandated 54.5 mpg CAFE standards predicted to add $3000 to the price of a car, in 13 years! How much do leather, 8-way power, heated seats add? How about navigation w/touch screen? Dual climate control? And it's over a decade away. Quit whining about it, design the more fuel efficient vehicles, and once that new tech is mass produced, it won't add $3000 to every car. Hell, inflation will probably add more than that...?
        BG
        • 2 Years Ago
        @MaM
        You just described the frou frou crap that millions of buyers claim they "need" in their next crossover. It's as if they couldn't live without all these features.
      Generic
      • 2 Years Ago
      Kinda sounds like political BS to me. I guess the world forgot cheap cars that were already released and got great fuel economy. CRX HF got over 50MPG. Stop making cars bigger and stop trying to load them with enough sensors to land on the moon. The formula is not some mystical magical unobtainium goal. Some of the current economy cars have as much if not more HP then a old GTI. Lighten the damn load and make cars the size they used to be. Engine and aerodynamic technology can easily do it as long as the cars get smaller again and not bigger.
      rem
      • 2 Years Ago
      This seems like it would be more credible if it were a group of engineers making the claim. As trustworthy as an organization that represents automotive dealers might seem, I'm just not sure they have the necessary technical background to really make these claims.
        evannever
        • 2 Years Ago
        @rem
        "As trustworthy as an organization that represents automotive dealers might seem," ...hillarious
      REOakes
      • 2 Years Ago
      If the efficiency of a vehicle increases over 50%, then the cost of ownership declines, no matter what the cost of fuel. If increased efficiency and higher fuel prices occur, then older, less fuel efficient vehicles will drop in value, meaning they are more affordable to people. This "study" is flawed and obviously biased.
      Synthono
      • 2 Years Ago
      How many millions of Americans are buying cars under $18,000? In the doomsday scenario, that's the probable price of entry - in reality, that class of cars will see the smallest price hit, since they need the least amount of work to meet economy goals. They're already light, they're already powered by efficient, compact engines. I don't have the numbers on me, but from memory that's also not a very large sales bracket.
        brandon
        • 2 Years Ago
        @Synthono
        The point is those that buy the 18k car typically can't afford it. So those cars have the least ability to changed in price. (IE, a very elastic demand curve) BTW, subcompacts make up 23% of the market. Take away have of those, and you have effectively lost 1.4 million buyers using this years tracking numbers in that scenario. As a solid half of the subcompact market can barely get approved for the loans they are getting.
          Synthono
          • 2 Years Ago
          @brandon
          First off, as mentioned, they won't need as much tech to meet the regulations, so the prices won't see much change. At the doomsday scenario we're seeing $18k as the bottom end, but in the real world we're not going to see very much price adjustment - The bottom end Versa sedan might go up to $12k, but in general you're probably going to see everything sit roughly where it is now. Second, 1.4 million isn't 7 million.
          brandon
          • 2 Years Ago
          @brandon
          I was speaking on subcompacts alone. THAT is, alone, 1.4 million. And yes, they will still have a ways to go to meet to those standards. As I have said, automobiles are nearly their mechanical limits. Next, it will take more hybrid technology to get to those minimums. That tech isn't cheap, and it will have to make it into more cars. so you will see a 1500-2k swing even in the subcompacts. Whatever, clearly this is what's wrong with the world. People can't see the forest for the trees.
      Zoom
      • 2 Years Ago
      If the cost of ownership declines, then people will just have to save their money before buying cars instead of financing the full amount. Nothing wrong with that IMO.
      beefchow
      • 2 Years Ago
      All of western civilization is going to collapse due to this notion that "everything needs to be financed". WTF, if you can't afford a $30,000 new car -- get a used car that you can afford! It'll still get you to work and back, hopefully you save some of your wages and not have to live life as a bonded slave to creditors!
        Generic
        • 2 Years Ago
        @beefchow
        The price of cars have gone from being a secondary side annoyance as far as payments go, to a major life style changing purchase. You got the younger crowd that seems to think that 25K is pocket change, and the older crowd that doesn't want to tie nearly as much in to a car. The fact that the used car market is dried up clearly shows that a number of people don't want to tie as much of their personal income in to the new car prices. In the end, I think the auto industry is going to have to start selling stripped out cars again. Not everyone wants or needs toys on wheels. I don't ever want a car without AC, but that used to be a normal option. Now, they put standard everything on a car, no option. That can't last.
      BG
      • 2 Years Ago
      This projection does not make much sense. Really low income people usually buy used cars, and there will be plenty of examples in the used market, especially considering that contemporary cars last 10 plus years with reasonably maintenance. If you look at the statistics of recent sales, prices creeping up to the $40k region for many models of SUVs, trucks, and crossovers have not diminished sales. Despite all the claims of the deepest recession since the 1930s, there is still an amazing amount of money (or borrowing power) sloshing around in the US.
      NC1
      • 2 Years Ago
      This doesn't make sense to me. They say the average $30,000 car price will rise to to the extent that lower income buyers won't qualify for a loan. Well, first off, I assume the price of a car lower income buyer will buy is considerably less than the average of $30K. But putting that aside for the moment, if the $3000 price increase makes a $30,000 car too expensive, won't they just buy a $27,000 car they can afford? It seems to me the only ones that it would preclude buying a new car would be those that are already buying the cheapest cars available, so they wouldn't be able to move down to a cheaper car. Though, in many, if not most cases, they'd probably be better off getting a used bigger car than a new Versa or something.
        graphikzking
        • 2 Years Ago
        @NC1
        Plus with gas prices going up better fuel efficiency means cheaper fill-ups. SIMPLE MATH PEOPLE: Estimates on the following: $4 / gallon gas price 235 miles per week avg. (12,220 miles / year) 25mpg car =9.4 gallons = $37.60 per week in gas. 40mpg car = 5.875gallons = $23.50 per week in gas. $14.10 in gas savings a week ($61 per month savings) - $733.20 per year Savings of .... $3,666 over a 5 year loan. So the way I see it - we are giving more money to engineers and union car builders and LESS money to Overseas for oil!!!! Saving over $3,600 in 5 years. What if these low income people keep their cars for say 7 years and gas stays the same $4. Then they are going to save $5,132. Looks like a win win for everyone except the middle east if you ask me!
        Feurig
        • 2 Years Ago
        @NC1
        They are talking about *average price*. This means that the lower limit is perhaps 10-15k or something.
      Avinash Machado
      • 2 Years Ago
      Seems quite exaggerated.
      Jonathan Arena
      • 2 Years Ago
      I am by no means an economic analyst, but this seems a little ridiculous to me... Ok so the average cost of all (new) automobiles goes up by $3000 over the next ten years accoriding to stricter regulation, and apparently that means that 7 million new buyers out of the current 13 or so million (per year) can't afford it? Even though the fuel economy savings would more than double the cost of the price increase? Can someone explain to me what I'm missing here?
        brandon
        • 2 Years Ago
        @Jonathan Arena
        This has to do with the fact that people buy cars that they can't afford as is. Now a car that many could barely afford, will no longer be an option because you have now risen the payments by 45 dollars a month on a typical 60 month loan. Because for every 1k financed the payment changes by 16.67, minus interest. As someone who has worked in sales and service for 6+ years, I see it every day. People haven't been able to afford the cars they have been buying for years now, this is just going to exacerbate the problem to the point that people that could barely get approved for that new car will now not be approved. Sure there is probably some fluff by the NADA, but it is for the most part true what they are saying.
        Feurig
        • 2 Years Ago
        @Jonathan Arena
        1) I think the article was being misleading. I think it means hypothetically, if everyone in America of car-buying age went out and bought a car at once, 7 million would be shut out. Doesn't mean 7 million a year or even that those 7 million would necessarily be out buying cars. 2) Time value of money makes so that the $3000 upfront cost is of higher value than the supposed $8000 of savings over "the life of the vehicle."
        Clinton
        • 2 Years Ago
        @Jonathan Arena
        What NADA is saying is that 7mil people will be less credit worthy, to the point the they think lenders will stop financing those folks. If the avg car goes up $3k, you can almost assume the avg car loan will go up about $3k. Eventhough newer cars will save them on avg of $8k over the product's lifetime, the banks don't view that as larger purchasing power for those people. Debt to income ratio comes into play in determining yoru credit worthiness. So if the avg car buyer's wage goes up about $3k in the next ten years, which is not likely, then those 7mil people will be ok... for the most part. .
          brandon
          • 2 Years Ago
          @Clinton
          SVX, it's not that simple. The people that buy most new cars are the ones on the "edge" of what they can afford as is. So this is going to push those people out of the market, and that is what this person is saying. Which is 100% correct. As anyone who has been in the car business, or even spent some time in economics, can attest. People will still put down x dollars on average, only now that x dollars will be a smaller portion of that new car, so average loan value will increase with it pushing those that would have ordinarily bought that new car, out of the market.
      TokyoRemix
      • 2 Years Ago
      So let me get this straight...they'll be unable to finance a new car, even though over the course of the car's lifetime, savings on gas will make it cheaper? So the solution there is to buy a cheaper, less efficient car, spend more in total during the car's lifetime and then be unable to finance your NEXT cheap, inefficient car? This is the stupidest argument I've ever heard. We're talking about a limited natural resource. Better to make progress slowly than to rip the bandaid off when it's too late.
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