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Better mpg means higher cost?

By Tara Baukus Mello · Bankrate.com
Saturday, September 1, 2012
Posted: 6 am ET

The new federal fuel-economy rules, which were released earlier this week, will result in less gasoline costs for consumers but a higher payment on a car loan, since the new rules will increase car costs.

The Department of Transportation and the Environmental Protection Agency finalized the new regulations, creating a 54.5 mpg standard by the year 2025 as part of the Corporate Average Fuel Economy, or CAFE, standards. The National Automobile Dealers Association, or  NADA, has responded by saying the new mandates will add nearly $3,000 to the average price of a new car when they are fully implemented in 2025 due the additional technology and manufacturing changes that will be required for these cars compared to today's new cars.

As a result, NADA says the increased cost will prevent almost 7 million people from buying a new car at all and will prevent millions more from being able to afford a car that fully meets their needs. It has asked Congress to continue to review the new regulations, which roll out in stages over the next 13 years, to ensure that cars remain affordable to all Americans.

The newly approved fuel-economy standards are a bit misleading in that they are calculated based on the average of all the cars in an automaker's fleet. So the 54.5 mpg will be the required average in 2025 as the rules currently stand. John O'Dell, green car analyst at Edmunds.com, says the typical mpg rating on a car window sticker will be around 36 mpg in 2025 with the new standard.  While this will surely decrease gasoline costs for consumers, it is not as big of a jump as it seems to be at first glance.

Tara Baukus Mello writes the cars blog as well as the weekly Driving for Dollars column, providing both practical financial advice for consumers as well as insight into the latest developments in the automotive world. Follow her on Facebook here or on Twitter @SheDrives.

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1 Comment
James E. LaBarre
September 04, 2012 at 9:40 pm

Would be more ironic if it were the US Automakers complaining about "cars remain(ing) affordable to all Americans", seeing as how it was due to their pushing/bribing our government to put restrictions on imported cars, simply so the US automakers wouldn't have to compete. And even in a *rigged* market, those companies *still* couldn't make a profit.