Double Whammy: Economy Regulations Make New Cars More Expensive, Used Car Prices Also Rise

The National Automobile Dealers Association warns that stricter fuel-economy regulations will make cars more expensive, preventing about seven million Americans from being able to afford a new car. The NADA study was based on the government's proposed rules that would see Corporate Average Fuel Economy requirements jump to 54.5 mpg by 2025. The dealer group points to early studies by the Environmental Protection Agency and National Highway Traffic Safety Administration that say new-car prices would rise about $3000 in order to meet the aggressive CAFE targets. This is because automakers would need to invest in new technologies, possibly including hybrids, to boost fuel economy. However, the NADA study released today says that about seven million Americans would no longer be able to buy new cars if prices increased by that amount, in part because they wouldn't qualify for the pricier vehicles. Many of those "priced out" of more fuel-efficient cars would be college students and young working families. As a result, those customers might be forced to continue driving older, less-efficient cars. NADA Government Affairs Committee chairman Don Chalmers, who owns a Ford dealership in New Mexico, says that this means enacting higher CAFE regulations to reduce vehicle emissions will backfire. "If my customers can't buy what I've got to sell, there are no savings at the gas pump and there is no environmental benefit," he said. Then again, it might be difficult to obtain an efficient small car on the cheap far before 2025 rolls around. NADA is also warning that the prices of used cars will continue to rise. Because fewer new cars were sold since 2009, there are fewer high-quality used cars for sale now. NADA estimates that the country has 14 percent fewer used cars for sale under five years old today than it did in 2009. That, in turn, could make it more difficult for lower-income drivers to buy a vehicle. NADA is warning that used car prices will spike over the next few weeks. Prices of used compact and midsize cars rose 2.6 percent from March to April, and have increased an average of 4.3 percent since the start of 2012, according to NADA data. That increase is expected to continue with prices peaking from April through May; by June, NADA predicts used car prices may decline and normalize. Used car demand is rising because many customers want to buy more fuel-efficient cars in response to increasing gas prices, according to NADA. That is compounded by the fact that the supply of quality used cars is relatively small. It's looking like a tough proposition for buyers: the prices of new, more efficient cars will rise at the same time that the used-car market sees prices climb. Drivers looking to sell their used car, however, could stand to gain a lot by listing their car in the classifieds in the next few weeks. Source: NADA

Tyson
I don't think that doubling the economy of our vehicles is that difficult to do. Millions and even billions of dollars are tossed around to well publicized large corporations and in strange vehicle and fuel research. Most people just watch and wait for mandates to be made and hope the problem will fix itself. Cars aren't much heavier, don't have significantly higher amounts of power, and yet we have not seen huge fuel economy boosts for all the expensive technology packed in our cars. The percentage of heat energy from fuel that gets from the tank to the wheels still has the same major losses that we have had since first driving cars. We have millions of smart capable people in the country and I think that opportunities should be given on a much smaller basis to let new ideas come to life. Government mandates make a slow process even slower.
John
Aside from this, the used car market is getting skewed. Where I live, used economical cars get snapped up and about the only thing that is available in any quantity are 15mpg trucks and SUVs. We basically need to halt production of everything that gets less than about 20mpg permanently and let these cars get used up and taken out of the system. The problem is that people with money keep buying inefficient cars but the people on the used market can't afford to buy a gas guzzler, but are often forced into it.
John
I don't buy it. The least expensive cars are already some of the most fuel efficient. And a good TDI will do that kind of mileage right now, no problem. Big cars will be the ones that need more tech and lighter materials. I would be more likely to buy a car NOW if I could get a high efficiency car like the VW Up! with a TDI. But I can't, so it's not worth it. I'd ditch my pickup for a VW Amarok at double the fuel mileage, but don't have that option. And the reality is, the ONLY way to keep fuel prices reasonable is to cut consumption drastically. Otherwise, we'll face the opposite problem, where people can't afford $10 or $15/gallon gas because their cars get 15-20mpg and they had few good options when they were shopping. Think $3000 extra is too much? Try $15/gallon gas with your current car. Because that's where this is going. And, BTW, Don Chalmers is a huge Republican donor, not just the typical car dealer.

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