Working Families Priced Out Of Car Ownership Under Biden’s Proposals
New car prices are up 25 percent under Biden’s Presidency and they will likely increase further as Biden’s proposed auto efficiency standards will increase automakers’ production costs. In 2018, there were a dozen new car models that sold for less than $20,000, but in 2023, there was only one: the Mitsubishi Mirage, which accounted for about 5,300 of the 7.7 million new vehicles sold in the United States in the first half of the year and is scheduled to go out of production in two years. The average new car now costs $48,000 and the average used car now costs over $27,000–up more than 30 percent from pre-pandemic levels and almost as much as the average new car did just a few years ago. And in Biden’s America, the average new car loan now has a monthly payment of over $750, with an interest rate of 9.5 percent. For used cars, the average car interest rate is 13.7 percent. As Biden continues with his net zero carbon policies, his regulatory costs are skyrocketing and prices reflect that. Biden’s proposed rule regarding “Corporate Average Fuel Economy Standards for Passenger Cars and Light Trucks for Model Years 2027-2032 and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030-2035” is estimated by the Department of Transportation to cost $88 billion.
Last year, Biden got behind the wheel of a Corvette Z06 at the Detroit Auto Show. The price tag for that car starts at $106,000, which is nearly $25,000 more than the previous-generation Corvette. If buyers are willing to spend more than $100,000 for a vehicle, they can choose from 32 models. For the average American, paying off a new car at current prices requires 42 weeks of income, up from around 33 before the pandemic.
Supply chain issues post-pandemic have helped to boost prices for autos. According to General Motors, the average price paid by its buyers last month rose 3 percent quarter over quarter, to $52,000. The profit from the higher prices has helped U.S. automakers make the transition that President Biden is demanding to an expensive, all electric vehicle America. Companies make up their sizable losses on electric vehicles by charging more for internal combustion vehicles, driving up the cost of transportation for all Americans.
Biden’s Auto Efficiency Standards
Biden’s fuel economy regulations that essentially mandate a transition to electric vehicles will increase the cost of buying a new vehicle for Americans. The Transportation Department’s proposed fuel economy regulations indicate on page 56,342 of volume 88 of the Federal Register, that: “Net benefits for passenger cars remain negative across alternatives,” which means that mandating more stringent fuel economy for passenger cars will increase prices for consumers as automakers pass those costs on.
Transportation’s proposed rule regarding “Corporate Average Fuel Economy Standards for Passenger Cars and Light Trucks for Model Years 2027-2032 and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030-2035” sets fuel economy standards for passenger cars and trucks. Proposed fuel efficiency standards for model years 2027 to 2031 increase at a rate of 2 percent per year for passenger cars and 4 percent per year for light trucks. Proposed fuel efficiency standards for heavy-duty pickup trucks and vans for model years 2030 to 2035 increase at a rate of 10 percent per year. These are vehicles used by businesses and tradesmen and increasing costs for their transportation will be made up by anyone requiring construction, plumbing, electrical work or handyman services, driving inflation higher.
Biden’s Transportation Department estimates that its plan of increasing passenger-car standards by 2 percent each year will reduce private welfare by $5.8 billion over the life of the cars. After accounting for alleged social benefits, such as reduced climate-change damages in foreign countries, the standard reduces total public welfare by $5.1 billion. The other “alternatives” the Transportation Department is considering have higher net costs of about $11 billion, so this is the preferred proposal. Of course, other options not analyzed exist, but the process is driven by Biden’s fixation with the “existential threat” of climate change he is using to push his proposals.
Transportation’s cost estimates, however, are questionable and are likely designed to underestimate costs. For example, the Transportation Department assumes that investing in fuel economy has no opportunity costs. To improve fuel economy, however, carmakers must sacrifice other improvements that drivers like, such as towing capacity, safety features, trunk space, acceleration and the spare tire, which has been cut to reduce weight and cost. Because modeling these trade-offs is difficult, the department’s analysts pretend the trade-offs do not exist, but that is likely to attract litigation. Rulemaking by executive agencies is a very complex process in which the courts have shown increasing interest, and refusing to consider things which may complicate a political narrative is apt to be frowned upon.
Unlike previous rulemakings, the costs of Biden’s efficiency rule are now so high that regulators can no longer pretend that mandating greater fuel economy for passenger cars is a good thing for society. Increasing the costs of transporting Americans, as well as their goods and services, simply hurts them. The mission of the White House Office of Information and Regulatory Affairs is to stop regulatory proposals that would harm American society, and it should have squashed this proposal. But, because it is part of President Biden’s climate agenda, the proposal has survived. Page 5-39 of the department’s accompanying environmental assessment, however, estimates that in 2060 the proposal would reduce average global temperatures by 0.000 percent. The modeled effect is so small that there are insufficient decimals to notice a deviation. So, what are Americans paying higher auto costs to achieve?
Conclusion
Biden’s Transportation Department has no real basis for claiming that it can make better choices than drivers in the competitive market. In fact, it has been noted that the government has a poor track record for picking winners and losers. And, essentially taking away automobiles that are cost effective hinders mobility for Americans. Perhaps, that is the goal of the Biden Administration. That is, to make cars so expensive that everyone has to take mass transit, and perhaps relocate to urban areas to do so. So far, the result of Biden’s climate policies on American transport is “All pain; no gain.”
*This article was adapted from content originally published by the Institute for Energy Research.
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