Study Says More People Would Opt for Plug-ins If Monroney Stickers Focused on Total Cost of Ownership

Ever since the Automobile Information Disclosure Act of 1958, new cars sold in the U.S. must have a information sticker affixed to one of its windows, detailing basic information about the car, including its claimed fuel economy, basic specifications and more recently, environmental impact.

Often called the EPA sticker, the window stickers or Monroney stickers to give them their proper name, were proposed by United States Senator Almer Monroney, and are an essential part of any new car buying process today.

Would you be more likely to buy an electric car if it included total ownership costs for the vehicle over its lifetime?

Would you be more likely to buy an electric car if it included total ownership costs for the vehicle over its lifetime?

In recent years, the information contained on the Monroney sticker has slowly evolved to make it easier for buyers to understand how different fuel types compare to one another, requiring plug-in cars to display both electric efficiency in kilowatt-hours per 100 miles as well as Miles Per Gallon Equivalent. (MPGe). Although the former was deemed too different to conventional fuel economy figures for most car buyers to understand, the latter has caused a great deal of frustration in the plug-in world, since it is essentially an arbitrary figure based on the notion that one MPGe is the energy equivalent to burning one gallon of gasoline, roughly 34 kilowatt-hours of electricity.

The U.S. EPA and National Highway Traffic Safety Administration  — the two U.S. Governmental bodies responsible for setting the information which must be present on a car’s window sticker — have long maintained that buyers who are approaching alternative fuelled-vehicles find MPGe figures the easiest to understand. But now a new study from Indiana University, Indiana University-Purdue University, Indianapolis, and the University of Kansas (via Phys.org) suggests there may be a better way to help people understand the difference between owning a traditional and an alternative-fuelled vehicle: total ownership costs.

Current window stickers focus on fuel savings over a small, 5-year period.

Current window stickers focus on fuel savings over a small, 5-year period.

The study asked a total of 3,200 respondents in 32 different U.S. cities who were planning to buy a new car over the next two years to fill out an online survey back in 2013 on their attitudes towards car buying, getting them to rank cars based on information found in typical window stickers. The respondents were then shown the various different ways of expressing the total cost of ownership and cost savings that hybrid vehicles, plug-in hybrids and electric-only vehicles had over traditional gasoline-fuelled cars over the lifetime of each vehicle.

Currently, window stickers do not give the total cost of ownership for a vehicle over its lifetime. Instead, it lists annual fuel costs based on a total mileage of 15,000 miles per year, alongside the total fuel savings over five years of ownership compared to a car with an ‘average’ fuel economy at projected fuel prices for that year.

They do not take into consideration total ownership costs over the lifetime of the vehicle, including servicing costs, insurance, and other wear and tear.

Due to the traditionally higher sticker price that hybrid and plug-in vehicles have over gasoline models, many buyers are put off spending the extra money up front, but as many advocates and industry-insiders have maintained, the study has proven that total ownership costs can often sway consumers’ minds.

“The information of total cost of ownership is not yet included on the EPA fuel economy labels but seems to trigger consumer interest in conventional hybrid and plug-in vehicles based on our analysis,” study authors professorsBradley Lane and Rachel Krause from the University of Kansas’ School of Public Affairs & Administration say. “We find that when total cost of ownership information is disclosed to respondents interested in small to mid-sized cars, the likelihood of ranking a conventional hybrid, plug-in hybrid and battery electric vehicle more favourably increases and is statistically significant.”

Would total cost of ownership calculations for an electric vehicle  vs a gasoline car encourage more to plug in?

Would total cost of ownership calculations for an electric vehicle vs a gasoline car encourage more to plug in?

“Upfront premiums in purchase price can be very hard to overcome. People have high personal discount rates, meaning that savings often need to be perceived as rather large and quickly accumulated to be considered ‘worth’ a more expensive upfront investment,” Krause added. “In this study we find that showing savings from fuel-efficient vehicles compared with regular vehicles in terms of total cost of ownership increases the perception of their value – although, of course, their actual savings remains the same.”

When it comes to total cost of ownership for plug-in vehicles, Lane says results are even more noticeable, although a minority still do choose other factors first.

“The results indicate to me that, for all that people claim or attempt to make decisions about vehicle purchase based on rational factors like cost, fuel efficiency and safety,” Lane said, “there are quite a few other emotional factors—like brand and body style—and use factors—like size and carrying capacity—that usually trump those others, even though it costs them thousands of dollars over the life of the time they have the vehicle.”

Fuel cost comparisons alone are not enough, says study.  Maintenance, Insurance should be figured in too.

Fuel cost comparisons alone are not enough, says study. Maintenance, Insurance should be figured in too.

Those looking for a small to mid-sized car are most likely to change their buying preference based on total ownership costs over the lifetime of the vehicle, the authors said, with those looking at larger vehicles like crossover SUVs the least likely to be influenced by the financial benefits of buying a hybrid or plug-in car over the vehicle’s life.

The study’s conclusion? That while European studies show that showing the total fuel cost of a vehicle is enough to push people towards alternative-fuelled and fuel-efficient vehicles, displaying total cost of ownership over the lifetime of the vehicle is far more likely to influence buyers.

Should EPA labels be more upfront about total ownership costs? Would it make you buy a different car if you could see that information when buying a car? Or do you think there’s already too much information on window stickers?

Leave your thoughts in the Comments below.

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  • Chris O

    Be careful what you wish for. The dominant factor in car TCO is depreciation and that could quickly cancel out any savings if depreciation turns out to be high because of factors like battery degradation and -more importantly- obsolescence when first gen 80 mile EVs being superseded by second gen 150-200 mile EVs. nnnAlso depreciation is an unknown; it has to be estimated. If it turns out that the real numbers are worse that could cause all sorts of legal problems.nnnIn some markets lease deals make the whole TCO thing much more transparent for consumers of course.

    • David Galvan

      Depreciation might not matter for people who plan to use the car for it’s entire useful lifetime (say 10 years +). That may not be a huge part of the population, but to be anecdotal: I didn’t care about the expected depreciation of my 2014 Nissan Leaf because I plan to drive it until it dies for good. Over that kind of timescale, any car in that price range is not going to retain a significant portion of its original price.

      • Chris O

        TCO is definitely related to the number of years one plans to own the vehicle which further complicates putting anything useful concerning TCO on a window sticker.