2017 Chevrolet Bolt EV electric cars outside dealership [photo: Patrick Reid]
Rising fuel economy standards make driving more affordable for low-income households, not less as the Trump administration argues, according to a new study by the Consumer Federation of America.
In their proposal to freeze fuel-economy increases, the EPA and NHTSA argued that increasing fuel economy standards compromised safety by making new cars with more modern safety features less affordable.
Income of new-car buyers [SOURCE: Bureau of Labor Statistics]
There’s enough dispute around the numbers to conclude that small assumptions one way or another can tip the scales by a few hundred dollars either way.
The CFA study concludes that argument may be irrelevant: Lower income households can’t afford to buy new cars anyway.
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According to the study, released Wednesday morning, fewer than 10 percent of households earning below the U.S. median income buy new cars.
Instead, they spend their money on gas. Those households spend an average of 9 percent of their annual income, or about $1,330 per year, on gas, the study shows. Much of that is spent driving back and forth to work. Middle-income households spend only half as large a percentage of their budgets on gas.
Fuel expenses as a percent of income [SOURCE: Bureau of Labor Statistics]
The rising fuel economy standards on cars built since 2012 have fed a steady stream of increasingly efficient used cars into the market, the study says.
Preserving fuel economy standards is “critically important to millions of financially challenged Americans,” said Jack Gillis, executive director of the CFA.
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What’s particularly tragic about reducing fuel economy standards “…is that it devastates low-income family finances,” he said. “Fuel economy standards that allow consumers to get the most out of a tank of gas are vital in helping keep low-income families mobile.”
Once new cars that get better fuel economy reach the used-car market, they can save low-income consumers $900 over the six years that they typically own the car.
The cost of new vehicle technologies, both for improving fuel economy and safety, is borne primarily by new-car buyers and is greatly diminished for second-hand buyers after the vehicle depreciates.
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The study estimates that better fuel-economy and safety technology adds an average of $40 to the price of a used car, while saving more than $12 every month the consumer keeps the car. The benefits of those savings can provide six times the benefit in low-income households that they do in middle-income households to allow money for other essential purchases
“The Trump administration’s argument that the current fuel economy standards would force low-income consumers out of the new car market is ridiculous. Low-income consumers do not purchase new vehicles,” Gillis said.
“What is so … ironic about the Trump administration’s claim that the fuel economy standards hurt low-income consumers is that they spend a higher percent of their income on gasoline than any other group. They need the standard more than any other income bracket.”