Stricter Fuel Economy Standards Proven to Save Consumers Money

Car buyers will readily see the pocketbook advantages of the upcoming Corporate Average Fuel Economy, or CAFE, standards for 2025. When factoring all costs, consumers are projected to save at least $3,000 per car and $4,200 per truck over the life of their vehicle, according to a new report published by Consumers Union (PDF), the policy and advocacy arm of Consumer Reports. Based on government gasoline forecasts, should prices rise at the pumps to $4.50 a gallon, the savings would climb to $5,600 per car and $7,300 per truck.

Those savings factor in the cost to reach the fuel economy standard, estimated to range from $1,094 to $2,167 per vehicle, according to the National Highway Traffic Safety Administration and the Environmental Protection Agency. The financial benefit to consumers would be even greater should the automakers’ costs for complying with the standard decrease over time.

The end goal is raising the average real-world fuel economy to 40 mpg for new cars, from 25.5 mpg today. Of course, some vehicles will fall short of that goal, while others will exceed it. As is the case today, the target is focused on the fleet average. (The standards have been referred to as targeting "54.5 mpg," but that figure is a regulatory goal that includes credits and other incentives.)

"We’re already seeing automakers beating today’s standards," said Shannon Baker-Branstetter, the energy policy counsel for Consumers Union. "And with existing and emerging technologies in this field, we believe there is great potential for even more progress in this space, even if gas prices remain low.”

Car buyers who finance their vehicle will see an immediate return, as the monthly fuel savings are calculated to be greater than the cost for achieving that standard when broken down to monthly portions over a typical five- to six-year loan. For those who pay cash, the fuel savings in the first year would not outweigh the total added cost associated with compliance costs for the manufacturer, but customers can expect to recoup their investment within three to five years.

The Consumers Union report bases the costs of complying with 2025 CAFE standards on assumed incremental technology costs for new vehicles, as estimated by NHTSA and the EPA, along with associated insurance and maintenance costs. Fuel savings are based on an analysis of estimates for miles driven and future gasoline prices from the Energy Information Administration.

The CAFE rules, which begin to phase in in 2017, stem from an agreement among automakers, the federal government, and the state of California. Automakers widely expect to build many more hybrids and electric cars to meet the requirements.

Consumers Union has long supported increased fuel economy standards, filing comments and testifying in favor of the increased efficiency standards at public hearings held by the EPA and NHTSA.

Download a PDF of the complete report: "Consumer Savings From 2025 Corporate Average Fuel Economy Standards (CAFE)."

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