If there’s one big takeaway from the National Automobile Dealers Association convention going on in Las Vegas right now, it’s that the car market is in flux. NADA, however, has gone so far to say that changes in government policy and the used car market could lead to some bigger stickers on dealer lots.
NADA’s crystal-ball predictions were two-fold this week: on one hand, used cars will become more expensive as demand outpaces supply; on the other, new cars also stand to become more expensive as carmakers work to comply with tougher Corporate Average Fuel Economy, or CAFE, standards.
Used car prices jumped three percent last year and stand to go up an additional 1.8 this year, according to NADA’s analysts. While upward used car sales will be thanks to the usual suspects--the small and mid-size segments--NADA also says that large SUV prices will go up as the supply wanes.
As for the supply of new cars, NADA has other ideas: it warns that the 54.5-mpg standard mandated by the federal government for the year 2025 could adversely affect sales of new models and keep potential buyers out of dealerships.
NADA chairman Bill Underinner said that while his organization is a hard proponent of increased fuel economy and efficiency, the CAFÉ standards go a bit too far. Underinner predicts, thanks to a study by the Environmental Protection Agency, that CAFE standards could account for a $3000, across-the-board price increase for new cars. In doing so, NADA predicts that as many as 7.5 million people will be priced out of new cars.
In a worst-case scenario, NADA’s two predictions could spiral around each other: new car prices drive buyers into used, and increasing demand for used cars drives those prices higher.
Is this doomsday scenario likely? Probably not, if you’re to believe the score of automakers who have already surpassed CAFE regulations without any noticeable uptick in pricing. Automakers like Honda, Toyota, Nissan, Hyundai, and Kia are already at the halfway point--reaching an adjusted 35 miles to the gallon on average by 2016--and have seemed to support the proposals so far.
Sources: NADA, Automotive News (Sub. required)