Later this year, the Obama Administration plans to mandate that car and truck manufacturers produce vehicles that get 54.5 miles per gallon by 2025.
But a new study by the National Automobile Dealers Association says such a move would add $3,000 to the cost of a vehicle, thereby making 7 million low-income Americans unable to finance a new vehicle:
“The unintended consequences of the proposed fuel economy increases are clear,” said David Wagner, the primary author of the study and an analyst with the NADA Used Car Guide. “If the price of a vehicle goes up by the government estimate of almost $3,000, millions of people will no longer be able to finance a new vehicle.”
The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA), however, contend that the raised fuel standards would save consumers money over the long haul:
“With these standards, passenger cars and trucks are expected to save consumers an average of up to $6,600 in fuel costs over the lifetime of a model year 2025 vehicle for a net lifetime savings of $4,400 after factoring in related increases in vehicle cost.”
Still, say critics, those savings can only be realized if a person can qualify for financing. The average cost of a vehicle is currently $30,000; the new regulations would hike the price to $33,000, thereby eliminating an estimated 7 million Americans from qualifying for a car loan.
“Loan qualification is based mainly on the customer’s income, existing debt and the vehicle’s price,” said Don Chalmers, president of Don Chalmers Ford in Rio Rancho, N.M., who heads NADA’s Government Affairs Committee. “The resulting calculation is simple: Fewer car shoppers will qualify for auto financing with higher vehicle costs.”
According to the Detroit News, 13 automakers have endorsed the Obama Administration’s plan. The EPA and the NHTSA both hail the new rule as a victory for big labor and environmental groups: “This progress was made with the help of the auto industry, labor, the environmental community, and consumer groups, and it will benefit our nation’s health, environment and the economy for years to come.”
According to CNN Money, US taxpayers lost $14 billion on the automobile bailouts.