Are Americans Really Willing to Pay More for Fuel-Efficient Cars?

A recent survey conducted by market research firm Penn Schoen for Ford Motor is being spun by the mainstream media to say that Americans are now more willing to pay more for a fuel-efficient vehicle. The survey really shows that only 25 percent of those surveyed would be willing to spend just $1000 more upfront on a hybrid car that would save money down the road through lower fuel costs. Consumer resistance to higher auto prices is the driver behind the Obama administration’s push to raise Corporate Average Fuel Economy (CAFE) higher and higher.  The new CAFE standard is 54.5 miles per gallon by 2025.

The National Automobile Dealers Association estimates that these new CAFE standards will lead to an average price increase of $3,000 per vehicle, which is $2,000 more than the survey shows that just  a quarter of Americans would be willing to spend. Ah, but the Environmental Protection Agency responds that this just shows that regulators know what’s better for consumers than consumers do.  Higher CAFE standards will force consumers to spend more on new cars that will eventually save them lots of money on gasoline.

NADA Chairman Bill Underriner doesn’t agree with EPA’s argument for higher fuel efficiency standards: “This increase shuts almost 7 million people out of the new car market entirely and prevents many millions more from being able to afford new vehicles that meet their needs”.

Currently, a hybrid can cost from $3,500 to $6,000 more than a comparable gasoline vehicle. A typical hybrid doesn’t come close to recouping this additional expense through fuel savings for many years. With an annual mileage of 15,000 miles and gas costing $4 a gallon, a hybrid would save between $650 and mid $700 a year in gas. If the hybrid saved $675 a year in fuel cost, it would take roughly 5 and half years for the hybrid to reach a fuel savings of $3,500, which is the low end of the additional cost incurred for owning a fuel-saving vehicle. The average American only owns a car for 6 years though. This means that gas would have to reach $8 a gallon for the hybrid to warrant spending the extra money.