Another Unintended Consequence

And this one is entirely predictable, so we have no excuse for it occurring.

The Obama administration has closed the comment period on a new set of automobile fuel efficiency standards, taking the government-mandated average from the current 2016 requirement of 35.5 mpg to 54.5 mpg by 2025—a 53% increase in those 9 years.  Superficially, this seems good for the environment and good for the amount of oil we buy from the Middle East.


These fuel efficiency standards will add $3,200 to the price of a new car.  As a result, the National Automobile Dealers Association estimates that nearly 7 million drivers won’t be able to buy them because they’ll be unable to qualify for the loans necessary.  After all, most car buyers do so with loans against the car or pickup that they’re buying.  As the NADA points out, during the loan approval process,

…it matters not whether the new vehicles in question offer improved fuel economy performance characteristics compared to the transportation options currently being used by prospective purchasers. … All that matters is whether prospective purchasers are creditworthy.

As a result, cash-strapped—and other frugal—buyers will simple keep their existing cars longer or buy off the used car lot, thus keeping the (relative) gas guzzlers on the road longer.  Any claimed savings from the greater fuel efficiency is just “fantasy” for these 7 million drivers.

Moreover, the Alliance of Automobile Manufacturers estimates that compliance costs will reach $133 billion to $157 billion by the end of the process.  This is separate from the loss of sales of some $175 billion from those drivers not buying the new “fuel-efficient” car at a naively estimated $25,000 per.

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