Can’t Afford a New Car? Washington Partly to Blame

COMMENTARY Climate

Can’t Afford a New Car? Washington Partly to Blame

Mar 4, 2013 3 min read
COMMENTARY BY

Former Research Fellow

Katie Tubb was a research fellow for energy and environmental issues at The Heritage Foundation.

The average price of a new car in 2012 was $30,500. Wondering why? One contributing factor is the new Corporate Average Fuel Economy (CAFE) standards.

All models from a single manufacturer must reach an average of 35.3 miles per gallon (mpg) by 2016 and 54.5 mpg by 2025. The current average is 29 mpg. We already knew federal fuel efficiency standards don’t reduce global warming, considering that not even cap and trade would have. We knew they don’t reduce dependence on foreign oil. And now, if we didn’t know it before, we know that they don’t help make cars affordable.

By the government’s own account, the stringent new CAFE standards will increase the average cost of a new car by $3,000 in 2025. The Energy Information Administration warned that new cars priced under $15,000 may no longer be available by 2025. Further, people who buy a new car this year are unlikely to ever realize any fuel savings.

Efficiency is important, and car buyers certainly look at gas mileage when they consider their purchases. But car manufacturers also know that Americans value other things in their cars, too. Fuel efficiency comes down to a decision about how much you are willing or able to pay for it. Nothing in life is free—including efficiency.

Americans rejected cap and trade, but unelected officials have been going through the backdoor to implement CAFE standards, which amount to a cap-and-trade system for cars. If President Obama wants to pay a little extra for a little extra, that should be his choice. But he should not take that choice away from the rest of us.

Economic and environmental goals are not mutually exclusive—efficiency is in the interest of both, for instance. But basic fairness and the President’s green agenda are incompatible.

According to the 2013 Car Affordability Study by Interest.com, if the typical new car costs $30,550, with an average monthly payment of $550, the five cities most able to afford new cars—or come close—are:

1) Washington, D.C.
Average household income: $86,680
Affordable purchase price: $31,940
Maximum monthly payment: $628

2) San Francisco
Average household income: $71,975
Affordable purchase price: $26,786
Maximum monthly payment: $537

3) Boston
Average household income: $69,455
Affordable purchase price: $26,025
Maximum monthly payment: $507

4) Baltimore
Average household income: $65,463
Affordable purchase price: $24,079
Maximum monthly payment: $468

5) Minneapolis
Average household income: $63,352
Affordable purchase price: $24,042
Maximum monthly payment: $470

At the other end of the scale, the five cities least able to handle a car payment are:

21) Phoenix
Average household income: $50,058
Affordable purchase price: $17,243
Maximum monthly payment: $348

22) San Antonio
Average household income: $48,699
Affordable purchase price: $17,137
Maximum monthly payment: $334

23) Detroit
Average household income: $48,968
Affordable purchase price: $17,093
Maximum monthly payment: $332

24) Miami
Average household income: $45,407
Affordable purchase price: $15,188
Maximum monthly payment: $295

25) Tampa
Average household income: $43,832
Affordable purchase price: $14,516
Maximum monthly payment: $282

This piece originally appeared in The Daily Signal

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