WASHINGTON, D.C. -

The National Automobile Dealers Association released a study late last week suggesting that higher vehicle prices resulting from proposed fuel economy rules will cut millions of potential new-car buyers out of the market in 2025. 

Don Chalmers, president of Don Chalmers Ford in Rio Rancho, N.M., and chairman of NADA’s government affairs committee, declared, “To work, fuel economy improvements must be affordable. While you can mandate what automakers must build, you can’t dictate what customers will buy, nor can you dictate if a bank will make a loan.

“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,” Chalmers continued. “If car and truck buyers do not purchase these new products, we all lose.” 

NADA contends that the proposed rules — combined with the Obama administration’s previous fuel economy mandates — will raise the average price of passenger cars and light trucks for the 2025 model year by nearly $3,000, according to estimates by the Environmental Protection Agency and National Highway Traffic Safety Administration.

The NADA study titled, “The Effect of Proposed MY 2017–2025 Corporate Average Fuel Economy (CAFE) Standards on the New Vehicle Market Population,” points out that nearly 7 million lower income consumers, such as college students and working families, will not qualify for financing to cover the additional cost. 

“Loan qualification is based mainly on the customer’s income, existing debt and the vehicle’s price,” Chalmers said. “The resulting calculation is simple: fewer car shoppers will qualify for auto financing with higher vehicle costs.”  

The association explained that the study is based on an evaluation of a consumer expenditures report from the U.S. Bureau of Labor Statistics. NADA analyzed the financial profiles and purchasing behavior of a large sample of U. S. consumers to calculate debt-to-income ratio for households.

“The unintended consequences of the proposed fuel economy increases are clear,” noted 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,” Wagner added

Doug Greenhaus, NADA’s chief regulatory counsel for environment, health and safety, thinks the government needs to better understand the impact of the proposed fuel economy rules on consumers and auto lending before doubling down on new mandates. 

“Disregarding vehicle affordability will undermine the environmental and national security benefits the administration is seeking,” Greenhaus stressed.

“The proposed MY 2017–2025 fuel economy rules should be delayed until there is a more accurate picture of how prospective buyers likely will react,” he added.

The entire NADA study can be found here.

TrueCar Reviews New Models with Fuel-Boost Option 

With fuel economy creating such an industry discussion, TrueCar released another study on the subject, too. Analysts discovered that depending on the vehicle purchased, the hundreds of extra dollars paid for the premium fuel-boosting option could make financial sense or could prove to be a costly investment for minimal fuel economy gains. 

TrueCar believes the options that provide better fuel economy for the consumer may not seem costly when looking at the initial purchase price, but consumers need to be wary that the difference in fuel economy can be nominal for some vehicles. What’s more, it could take nearly 50 years to pay back the initial investment. 

Analysts determined that the vehicle that provides the best option for a consumer is the Mazda3 Touring with SkyActiv, which is cheaper than its counterpart vehicle, providing the best value for a consumer with immediate savings while the Chevrolet Sonic took nearly three years to pay off the premium for the Ecotec version.

TrueCar added that the popular Ford F-150 with EcoBoost took less than five years to break-even.

“The price of gas has consumers thinking about fuel economy, but there’s a financial investment involved with most of these fuel-saving packages,” explained Jesse Toprak, vice president of market intelligence at TrueCar.com.

“It’s important to compare the improvements in fuel economy and the extra costs of the package before purchasing a new vehicle,” Toprak continued.

Analysts found there are some models that only provide a small increase in fuel economy and the payback time on the investment could be lengthy. They said the Cruze Eco has the highest years to break-even (48 years) but the Fiesta SFE also takes more than 36 years to pay off the cost of the fuel-saving option.

TrueCar’s fuel-boosting options study assumed gas prices at $3.90 per gallon and an average 15,000 miles driven annually. 

“As fuel prices change, the break-even periods will adjust. When gas prices rise, a shorter break-even time will occur, while after gas prices decline, the break-even time will increase,” analysts pointed out.

For more information with the full charts on the comparison of the fuel economy packages to their counterparts, visit the TrueCar Blog at blog.truecar.com.