Sticker Shock: Cars More Costly Due to New Gas Mileage Rules

Sticker Shock: Cars More Costly Due to New Gas Mileage Rules

Americans continue to be careful with their spending habits, especially with the news that the economy may not be recovering as quickly as most had hoped. One of the factors generally outside of people’s control is the price of gasoline, and since there’s nothing to be done about the daily commute, people are turning towards more gas efficient vehicles by necessity as much as any sort of desire to help the environment. The government has been pushing that cars be manufactured with a higher standard of gas mileage, and it could be hoped that efforts towards the same goal would help on both the national and local levels. But it seems like the effect may hit Main Street in a much different way. Car dealers are voicing concern that those higher fuel-economy standards will end up forcing them to raise prices on new cars.

These concerns follow a study commissioned by the National Automobile Dealers Association to explore the effects of the Obama Administration’s tighter restriction of gas mileage. The study found that between 2017 and 2025, the cost of a new car will rise nearly $3,000. Additionally, the most inexpensive car they’ll be able to bring to market will carry a sticker price of $15,700. By their estimation, this will make a new car an expense that’s simply out of reach for as many as 4.2 million American households.

And according to further research, that’s the best case scenario. It’s impossible with current technology to reach these higher fuel standards without raising prices, and the National Automobile Dealers Association feels that increase could reach over $12,000. That would leave almost 15 million households unable to buy a new car, which could potentially decimate the still-delicate U.S. automotive industry.

It should be noted that the study did not explore how the new regulations will impact motor vehicle operating costs. Considering the price of gas, which continues to rise with no clear end in sight, better mileage standards will certainly end up saving motorists money over the life of the vehicle. The question is, will the savings in fuel consumption make up for the higher purchase price of the car?

The study did a similar analysis on used vehicles, and determined that those prices would rise as well. This wouldn’t be a result of the higher fuel efficiency standards, but a trickling down side effect of the damage to the new car market. Since more and more motorists would find they’re unable to afford a new vehicle, they’d begin to look at used cars. The increased demand would lead to less used cars available, and therefore a spike in prices.

It will be curious to see if certain car manufacturers feel the pinch over others. It seems like the cars that would be most impacted would be the inexpensive impact or sub-impact models, as they generally cater to the lower end of the market. But those vehicles also tend to be incredibly gas-efficient, and will be less affected by the new regulations. Perhaps cars like the Cooper Mini may find a bit more trouble, as they come with a larger price tag and less fuel efficiency than you’d expect. If they end up raising prices to luxury car levels, they may lose a large piece of their market.

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