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The Financial Truth About the New Fuel Standards

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You may have heard the recent announcement from the U.S. government that fuel economy standards are increasing to 54.5 miles per gallon by 2025. Certainly, this change is environmentally friendly—it’ll reduce greenhouse gas emissions and also help reduce oil consumption—but some claim that it’s hostile towards your wallet. So what’s the truth?

First, it’s important to debunk a common misconception about the fuel standard change. “The number is a goal, not a requirement,” says John O’Dell, senior editor of car-resource website Edmunds.com and member of the National Research Council’s Committee on Transitions to Alternative Vehicles and Fuels. And not every vehicle has to meet or exceed 54.5 miles per gallon. The benchmark is based on a projected fleet mix—the various types of cars and trucks that everyone expects will be for sale—and a manufacturer is allowed to have vehicles in their lineup that get 20mpg or 40mpg, for example, as long as their total miles per gallon averages to the new standard, O’Dell explains.

Unfortunately, it’s probable that the new target is going to cost. The Obama administration said new car prices will likely rise about $1,800, whereas Bill Underriner, chairman of the National Automobile Dealers Association, said vehicle costs could increase approximately $3,000.

“Auto makers are going to have to develop new technology or apply technology that already exists but is only used in a few high-end vehicles, and make use of it in more models,” says O’Dell. It’s likely that you’ll see more hybrid cars roll off assembly lines, while larger vehicles (such as pickups and SUVs) will use more lightweight alloys to replace heavy steel parts that they currently are made of.

But don’t expect all prices to increase. “A smaller car may only need a few aerodynamic tweaks to get it to the new number,” O’Dell explains. Not to mention that some vehicles already get almost 50mpg, so those models will only necessitate minor adjustments.

Ultimately, it’s likely that a short-term price increase will result in long-term savings for consumers. According to the White House, the new standards “will save American families more than $1.7 trillion dollars in fuel costs, resulting in an average fuel savings of more than $8,000 by 2025 over the lifetime of the vehicle.” Plus, it’s in the automakers’ best interest to keep costs low as possible, in order to keep those new models driving off the car lots.

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