Strict New MPG Rules to Raise Used Vehicle Prices: Study

Strict New MPG Rules to Raise Used Vehicle Prices: Study

Upcoming corporate average fuel economy (CAFE) standards mandate that new vehicles sold in 2025 and beyond will need to get an average 54.5 mpg, a standard that aims to save the U.S. 2.2-million barrels of oil per day.

But according to a recent study by Mark Jacobsen of the University of California, San Diego and Arthur van Bentham of Wharton, the fuel regulations could have an unintended effect on the used car market. The belief is that the stricter fuel economy rules will make new SUVs, pickup trucks and other inefficient vehicles more expensive.

As a result, people will turn to the used car market, ultimately raising the price for older SUVs and pickup trucks. That in turn will give owners a reason to hang onto their old vehicles even longer.

By studying vehicle scrappage rates, Jacobsen and van Bentham found that the least-efficient cars stay in the owners’ possession the longest. The two believe that between 13 to 23 percent of the expected fuel savings from the Obama administration’s fuel economy plan could “leak away” as a result of people turning to the used car market, or holding onto their vehicle longer than typical.

[Source: The Washington Post]

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