CAFE’s Midterm Evaluation For 2022-2025 Could Electrify Automakers One Way Or The Other

“Over the past 23 years, automakers have added new emission control and fuel-efficient technologies, safety features (electronic stability control, backup cameras, tire pressure monitors, automatic braking systems, etc.), connectivity and infotainment technologies and other features drivers increasingly demand. These new features, combined with the growing demand for SUVs and light trucks, caused average new car prices to increase by more than 60 percent since the early 90’s. In December 2015, the Kelly Blue Book reported the estimated average transaction price for light vehicles in the United States had reached an all-time high of $34,428,” says the Auto Alliance. “As noted in the figure above, as new car prices increased, interest rates dropped dramatically and remained low, making it possible for consumers to continue buying new light-duty vehicles. As a result, the increased vehicle cost was offset by the low cost of capital. In addition, average loan terms have lengthened significantly, approaching seven year terms. While this trend allows consumers to keep their monthly payments affordable, the risk is that the vehicle could depreciate below the remaining loan amount before it is paid off, leaving the consumer ‘under water.’”