Bacon's Rebellion

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Fuel Economy Standards Will Price 200,000 Virginia Drivers out of the New Car Market

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by

James A. Bacon
in

Proposed fuel economy rules for the year 2025 will raise the average price of a vehicle by $3,000 and price seven million potential new car buyers out of the market nationally, according to a new study by the National Association of Automobile Dealers released today.

A state-by-state breakdown indicated that 122,000 drivers in Virginia, or 1.9% of all licensed drivers in the state, would be affected.

Mandated fuel efficiency standards may be necessary to wean the nation from dependence upon foreign oil but making automobiles more expensive will push millions of lower-income drivers into the used car market. If the price of used cars then rises, as elementary economics predicts, then people will be priced out of the used car market as well.

Also, interest rates are bound to rise eventually from their rock-bottom lows. The Federal Reserve Board cannot sustain its stimulative, low-interest rate stance forever. Higher borrowing costs will price even more lower-income drivers out of the market.

In the past, the number of licensed drivers increased as more lower-income Virginians could afford automobile ownership. As cars become more unaffordable, the number of drivers will stall or perhaps even go into reverse. It’s not a stretch to conclude that Vehicle Miles Traveled will not keep pace with historical increases over the next 10 years.

What does this mean for public policy in Virginia? First, we won’t need a lot of roads and highways that planners think we will need. Projections of Vehicle Miles Driven made for the VTrans 2025 study were pure fantasy. Second, a lot of lower-income Virginians will need to find transportation alternatives — something we’re not preparing for. We need to be giving a lot more thought to making shared ridership services more ubiquitous and affordable so thousands of Virginians don’t find themselves stranded.

— JAB

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  1. DJRippert Avatar
    DJRippert

    Of course, the 2025 CAFE standards for new cars assume a 53+ mpg. That’s about 30 mpg better than the average of vehicles in use today.

    Let’s say gas averages $5.00 per gallon (in today’s dollars) in 2025. And a 2025 car will go 120,000 miles over its lifetime. That’s 2,242 gallons. If the 2025 car has today’s mpg it would be 5,217. The difference is 2,975. At $5.00 per gallon, that reduces the operating cost of the vehicle by $14,875.

    So, let’s review …

    The car built to 2025 CAFE standards will cost $3,000 more. However, over its life, it will save $14,875 in fuel costs. Assuming a 10 year useful life and straight line mileage, the new car saves about $1,500 per year in reduced fuel costs. So, the extra $3,000 pays back in about 2 years.

    If I were lending money to people who wanted to buy a new car I’d take the fact that they’ll be spending a lot less of their disposable income on gas into account.

    1. James A. Bacon Avatar
      James A. Bacon

      Explain all that gas mileage stuff to the used car dealership. I’m sure the guys in the back office will count gasoline savings over 10 or 12 years toward a 3- to 4-year note on the car.

  2. Peter Galuszka Avatar
    Peter Galuszka

    Bacon,
    As a staunch apologist for the one percenters, you seem to be going a little hypocritical here.Why are you suddenly worried about the affects of the need for less polluting cars and the impact on lower income people?You sure don’t seem to give a damn about them when it comes to taxes or health insurance. Why are you flaking for automakers?

  3. larryg Avatar
    larryg

    Peter ——–>>>>> Bacon….. ouch ! ouch ! ouch!…. but TRUE!

    Bacon is to Libertarian thought that cats are to catnip. He just cannot help
    himself. Never mind that DJ can easily demolish the NADA “concept” … JAB just parrots it as if it were gospel…. because it sounds so very “libertarian”.

    see the REAL PROBLEM here whether it is health care of CAFE standards…is the idea that the frickin govt has to involve itself in the issue rather than letting the lovely free market do it “right”.

    Even the laziest of free-market affectionatoes know that health care would be easily affordable to everyone including the poor if we let the free market “do it”. Similarly, letting the free market determine what kind of fuel mileage that cars get is a much better solution than the dratted govt-imposed standards.

    JAB doesn’t really believe this tripe but he feels duty-bound to stick up for the libertarian shtick. 🙂 The really funny thing is that the libertarians absolutely disavow all this stuff about paying one’s location costs….they think “sprawl” is the American Dream.

  4. DJRippert Avatar
    DJRippert

    “As a staunch apologist for the one percenters, you seem to be going a little hypocritical here.”.

    Peter – I’ve been wondering the same thing about Jim. He seems to hold a lot of inconsistent beliefs. However, I think he’s a rational guy. So, my guess is that the beliefs I see as inconsistent are actually very consistent if viewed from the right perspective.

    Here’s my bet:

    Bacon just doesn’t want to pay taxes. Not ever. Not to any entity. Not for any reason.

    Now, with that in mind, let’s examine a few recent Baconisms …

    1. The Charlottesville bypass. Bacon jumps into the fire alongside the Southern Environmental Law Center to oppose a bypass that has been in the making for the last 20 years. First, whenever you see Republicans aligning themselves with any organization that has “environmental” in the name – look out! Jim hopes that the SELC can delay the project just long enough for the rights of way acquired through eminent domain to expire. That will kill any project and restart another 20 year planning process. This has nothing to do with Charlottesville Tomorrow. It is simply a way to stall a $200M+ project so there is less pressure the budget and less chance of him paying taxes to keep transportation spending in tune with inflation.

    2. The CAFE conundrum. Jim doesn’t care whether CAFE standards are adopted and he doesn’t care if poor people can afford new cars. He cares about paying taxes. Here’s the money: “What does this mean for public policy in Virginia? First, we won’t need a lot of roads and highways that planners think we will need. Projections of Vehicle Miles Driven made for the VTrans 2025 study were pure fantasy.”. In other words, stop talking about needing to keep transportation in line with inflation and stop talking about me paying new taxes.

    3. Rail To Dulles, Part 2. Since the state is putting up a pittance of the project’s costs Jim Bacon senses that he may have to return some of the gushing deficit coming his way from Northern Virginia. Even a pittance is too much to return. So, RTD needs to be opposed. After all, mass transit always requires subsidies, right? So, it should be opposed, right? Let’s look at this latest post, “We need to be giving a lot more thought to making shared ridership services more ubiquitous and affordable so thousands of Virginians don’t find themselves stranded.”. Hmmm….

    Try applying the “I shouldn’t pay taxes for anything” logic to Jim’s commentary. Suddenly, it all makes sense.

  5. larryg Avatar
    larryg

    well.. it’s in the same church but a different pew. It’s “I don’t want to pay taxes if it does not benefit me and it subsidizes others behaviors that should not be subsidized by anyone in the first place”.

    On Mass Transit – you’re basically advocating that all of RoVa pay for mass transit in the urbanized areas because they “cannot afford to pay for it”.

    I’m a supporter of Mass transit but I have to say that when Mass Transit in NoVa “depends” on taxes on RoVa as well as taxes on ROAM (rest of America via Fed subsidies) that the wheels are coming off the taxing concepts.

    I’d even be interested to see an accounting of what NoVa pays the state in taxes verses what it gets back. As far as I know, the primary loss to NoVa is the 1% state sales tax that the State considers to be State revenue not NoVa revenue (and for that matter NOT RoVa revenue either). The state takes the 1% and decides how to allocate it and yes.. it’s not proportional to how it was raised but the SCOTUS has “advised” us that it’s un-Constitutional to favor kids education geographically – NOT just for Va but every state in the Union.

  6. Hydra Avatar
    Hydra

    They said the same thing about seatbelts, back in the day.

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