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.