Fuel-efficient cars worth the higher price, study says

Fuel-efficient cars are generally costlier than less economical models but the potential savings at the pumps make them worth the higher purchase price, an academic paper has concluded.

Buyers tend to fork out 0.6 per cent more for every 10 per cent improvement in efficiency, the study by two economists from the Ministry of Trade and Industry found.

But this is cancelled out by the savings over five years of driving with an annual average mileage of 19,100km, which works out to about $540 in real terms.

The paper, by senior economists Kenny Goh and Huang Jianyun of the ministry’s economics division, also suggested that buyers would be given a strong incentive to switch to fuel-efficient models by the new Carbon Emissions-based Vehicle Scheme (CEVS). This programme, which kicked in last month, grants rebates of up to $20,000 for cars that emit no more than 160g/km of carbon dioxide.

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