New federal gas mileage rules were proposed Wednesday that are expected to add thousands of dollars to new car prices. However, regulators say in the long run the higher vehicle price tag will be offset by drivers paying less to fill up at the pump.
Proposal Aims for Average Gas Mileage of 54.5 MPG
The Environmental Protection Agency (EPA) announced that new rules have been proposed to increase the average gas mileage of vehicles to 54.5 miles per gallon by the 2025 model year.
President Barack Obama originally announced the proposal over the summer, calling it “the most important step we’ve ever taken in reducing our nation’s dependence on foreign oil.” He explained that cars would be expected to get an average of 62 mpg in 2025, while trucks should average 44 mpg.
Major automakers in both the U.S. and overseas, as well as the United Auto Workers union and many members of Congress from auto-industrial states in the Midwest have endorsed the new rules. There are arguments, however, that the higher costs associated with the gas mileage rules could make it difficult for consumers to purchase new cars.
New Car Prices Will Increase by Thousands
In the EPA’s announcement yesterday, it released cost estimates attributable to the new gas mileage rules. The price for 2016 through 2025 model year vehicles will increase by about $1,946 per vehicle. Additional rules set to take effect in the intervening years would add about $1,000 in today’s dollars.
Despite vehicle cost increases, the agency said consumers would save an average of up to $6,600 in fuel costs over the lifetime of a 2025 vehicle, even after paying the more expensive purchase price. This is assuming gas prices are comparable to today’s prices.
The EPA said car buyers should be able to recoup the higher purchase price through fuel savings in less than four years. Even if the buyer is financing the price of a car and paying interest due to auto loan rates on the increased purchase price, they should save about $140 a year from fuel savings, the agency explained.
Some lawmakers are concerned about a bigger issue: who will be able to afford the cars?
The National Automobile Dealers Association (NADA) said in a statement that the new gas mileage rules are gambling that consumers will be able to afford thousands more for smaller, more expensive vehicles that may not meet their needs. Since most car buyers aren’t choosing fuel efficient vehicles now, many may just keep driving their older cars.
In the near future, the EPA is expected to seek public comment regarding the new rules. After which time, the rules can be enacted and take effect without any Congressional vote.
