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What Consumers Should Do Today About CAFE Changes

Any way you look at it, the cost of new cars will increase under new MPG rules

By Gary Foreman

June 19, 2009

• Canadian Auto Dealers File Class Action Against GM, Law Firm • GM Introduces Wi-Fi In Cars • GM Offers Money-Back Guarantee • GM's Newest California Showroom: eBay • GM, Chrysler Personal Injury Victims Left Stranded • 'New GM" Exits Bankruptcy • Judge Greenlights GM Bankruptcy Plan • Obama Set to Sign 'Cash for Clunkers' Bill • States Challenge GM Sale • Supreme Court Okays Sale of Chrysler to Fiat • Supreme Court Blocks Chrysler Sale • GM To Scrap Medium-Duty Trucks • Penske Hopes to Drive Saturn Off GM's Lot • New Chrysler Agrees To Honor Old Lemon Law • Consumer Groups Appeal Chrysler's Lemon Law Reprieve • Dumped GM, Chrysler Dealers Not Going Away Quietly • The Hummer Lives to Fight Another Day • GM Files for Bankruptcy; Chrysler Gets Court Approval • Chrysler Sours on Lemon Law Obligations • UAW, GM Agree On New Contract • Consumer Groups Challenge Chrysler Bankruptcy • GM Notifying 1,100 Dealers They're Being Dumped • GM, Chrysler May Close 3,000 Dealers • GM Moves Up Saturn Execution, Plans to Drop 2,600 Dealers • GM Prepares to Scrap Pontiac • U.S. Carmakers Getting More Federal Aid • GM Cuts More Jobs, Eyes China --- • Consumer Complaints about GM • Consumer Complaints about Chrysler

Just recently President Obama annouced a change in the CAFE mileage standards. Requirements for passenger vehicles will rise from the current 27.5 mpg to 35.7 mpg by 2015, while light trucks will go from 23.5 mpg to 28.6 mpg. While many are writing about what this means for the environment, auto workers and consumers in the future, we'll look at what consumers should be doing today.

The first thing that we can recognize is that the cost to buy a new car will increase, though promotions like "Cash for Clunkers" may delay the pain a few months. Automakers will have to make changes to reach the new standards. Those changes will cost money. That cost will be passed on to the consumer.

Harvard Professor Robert N. Stavins was quoted in The Belfer Center for Science and International Affiars saying, "according to the administration, the increases in CAFE standards (including both scheduled increases already on the books and the new Obama proposal) will add — on average — $1,300 to the cost of producing a new car".

"Because CAFE standards increase the price of new cars, the standards have the unintentional effect of keeping older — dirtier and less fuel-efficient — cars on the road longer. There is abundant empirical research on this issue," Stavins said.

We're going to limit ourselves to the economic factors (not the environmental ones). What the good professor is saying is that you're going to be driving your older car longer. And, he's probably right. On a 5-year loan at today's average 7.56% (courtesy of Bankrate.com), that $1,300 would add $26.09 to your monthly car payment. Or a total of $1,565.40 total over the 5 years.

And, you can call me skeptical, but the federal government seems to have a pattern of grossly underestimating how much things will cost. So that $1,300 estimate could be short by hundreds of bucks. So you'll probably stay in your old ride a little longer that you had planned.

What does that mean? It means that you'll need to keep your car in dependable running condition longer. The way to do that is to start taking better care of your wheels now. Preventive maintainance is the cheapest form of car care you can find.

If you haven't already, get familiar with the service intervals in your owner's manual. It will tell you how often to have the oil and other fluids checked or changed. It will also specify when certain proceedures (like replacing timing belts) need to be performed.

Don't look at that schedule as something that would be nice to do. If you want your car to last longer, the scheduled maintainence is required. And, don't figure that your car is four years old and it's too late to protect it. Even if you've never changed oil in your car, you'll still help it by beginning regular, routine maintainence now.

DIY

Learn to do some of the maintainence yourself. You'll save half by doing your own oil changes. Only simple tools and training are required. Anyone can do it. You don't need to know one end of a socket wrench from another to follow directions. Wikihow.com and DoItYourself.com have step-by-step instructions.

Let's move to the financial front.

It's much better to have the money ready to pay for the extra cost as part of the down payment. If you manage to save it upfront, it'll only cost you $1,300. But, if you include it in your monthly payments it'll add another $1,500 or more (depending on your interest rate). So you should begin setting aside an extra $50 or $100 each month in an account dedicated to your next auto purchase. If you don't do that now the higher auto payment will consume any savings in gasoline.

While it's always difficult to forecast the future, some things are fairly easy to predict. That CAFE requirements will mean that cars will cost more in the future and that some people will delay purchases is almost a truism. So it's the prudent consumer who will start to make adjustments today to avoid financial pain tomorrow.

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Gary Foreman is the editor of The Dollar Stretcher.com and newsletters newsletters. Not only does the site host thousands of articles on various ways to save money, but you'll also find a vibrant forum where people share their dollar stretching ideas. You can comment on this entry here or follow Gary on Twitter.

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