auto

New fuel standard could raise vehicle cost

President Obama recently announced new fuel economy standards that will require auto manufacturers to increase the average fuel economy of their fleets to 35.5 mpg by 2016.

The Obama administration estimates that achieving this goal will result in increased costs of $1,300 per vehicle, which will be offset in three years of driving, on average, thanks to the increased fuel cost savings. The reality of that estimate, however, is based on a number of factors, such as the fuel economy of the car and the number of miles you drive annually. When you take those factors into consideration, it may not have such a positive effect on your wallet.

The 35.5 mpg standard is the rating for the Corporate Average Fuel Economy, or CAFE.

The CAFE standard starts with the same formula as the better-known EPA rating, but also takes into consideration the sales numbers for each model in a manufacturer's fleet. So, high-volume vehicles count more toward an automaker's CAFE average than low-volume vehicles. In addition, the EPA rating has been modified multiple times over the last 30 years to bring it in line with real-world, fuel economy.

As a result, the fuel economy numbers for CAFE and the EPA estimates on a window sticker and in car ads are substantially different. On average, the 35.5 mpg CAFE rating actually equals about 26 mpg in the EPA ratings. More specifically, passenger cars in the fleet will need to achieve an EPA rating of 29 mpg to reach the 2016 CAFE numbers announced by the president; trucks, including many SUVs, will need to get 23 mpg.

One important note on the new fuel economy requirements is that the standards for cars and trucks are an average, and not a minimum rating for all vehicles. In other words, some cars will display ratings of less than 29 mpg on the window sticker, while some trucks will be rated at less than 23 mpg, but still meet the standard.

While the new standard is about a 40 percent increase in fuel economy overall, there are actually 38 models of cars and trucks out of 343 on the market that meet that standard today, according to research by Edmunds.com, the automobile rating site. Although that percentage isn't huge, three of those vehicles -- the Honda Civic, the Toyota Corolla and the Honda CR-V crossover -- are among the top 10, best-selling vehicles in the U.S. So, in theory, if you buy one of these vehicles in the coming years, you'll be paying more for a level of fuel efficiency that the car already had.

Of course, the $1,300 increase touted by the Obama administration is an estimate, and automakers will likely raise the price of each individual vehicle in its fleets by varying amounts. How much prices will go up remains to be seen, but it is likely that consumers will see an increased cost in all vehicles as the government pushes each automaker's fleet of cars and trucks to meet the new standard.

So, while cars and trucks will cost more in the future, you will be getting more bang for your buck in most cases. And, the more miles you drive, the quicker you'll recoup that extra investment.

Read more Driving For Dollars columns and more stories about auto financing.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
CAR & MONEY NEWSLETTER

Get cost-cutting tips for buying, selling and maintaining your wheels. Delivered monthly.

advertisement
Partner Center
advertisement

Blog

Tara Baukus Mello

Pumpkin-carving for car lovers

Car lovers will love carving a cool car pumpkin from a template created by three automotive aftermarket companies.  ... Read more


Connect with us