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
