Will CAFE costs push more buyers to used cars?

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jsousanis's picture
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Joined: 2011-06-14

With CAFE requirements driving more technology and cost into vehicles, will we see a reduction in new car sales as a result (i.e., will used cars become more attractive compared to expensive new cars)?

(Submitted at WardsAuto Outlook Conference March 11, 2014.)

hstoddard's picture
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Joined: 2011-12-30

The answer is they could reduce car sales for both new and used. However, I think the OEMs are figuring out how to keep development costs under control for technology and materials. Also, the average vehicle will be somewhat smaller, especially after 2016, meaning less inherent cost, and high residuals on used vehicles cut the price of new vehicles on trade-ins. There probably will be some cost penalty come 2016-17, but I don't think it will greatly hinder new-vehicle sales.

dzoia's picture
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Joined: 2011-06-14

It's not just CAFE pushing up the price of new and driving more buyers to used. Less-aggressive incentives -- so far the industry seems to have learned its lesson from the 2009 crash, higher content levels (electronics and connectivity) and the invasion of luxury brands into more entry-level segments also is pushing average transaction prices higher. In addition to used vehicles, it could open the door for a new influx of lower-cost imports from some developing market such as China.

dwinter@wardsauto.com's picture
Joined: 2011-08-08

Perhaps down the road we will see new-vehicle sales hit a ceiling because of the cost of meeting fuel-efficiency and emissions (and don't forget safety standards, too). But with the average age of U.S. vehicles still at 11 years, the relatively small number of U.S. consumers that can afford to buy new vehicles will continue to replace old vehicles as the cost of repairing and maintaining old, less fuel-efficient vehicles becomes too expensive to bear.

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