Bumper Guardian

By National Highway Traffic Safety Administration, August 2006

Cost-Benefit Analysis

Since repair costs occur over the lifetime of the vehicle, repair costs are discounted back to present value to make them directly comparable to new vehicle costs. After calculating the incremental costs and benefits generated above, we find the difference and multiply it by the 3 percent (0.8155) and 7 percent (0.6490) discount factor. These discount factors are weighted by vehicle miles traveled and survivability by age of the vehicle. Finally, we supply the installation cost from this value; this cost is assumed to be immediate and therefore does not need to be discounted over the life of the vehicle. This gives us the total benefit to society that is generated by each new car that is equipped with the system, over its lifetime.

While there are a large number of estimates and assumption made in the model above, we chose two factors as the most sensitive of the assumptions. These factors are the percent of low-speed crashes that are backing-up rather than being struck from the rear (assumed to be 10 to 25 percent) and the driver reaction to the warning, or the percent of the time the driver looks into the monitor for a camera system and performs this task appropriately, (assumed to be 50 to 80 percent of the time). As shown in Table 1, the incremental repair costs of the sensors far outweigh the benefits they generate (thus net benefits are negative). One would need half of the .99 low speed accidents to be backing up accidents, and a driver factor of about 80 percent in order for the systems to start to break even.

Table 2 Net LifetimeBenefits of Various Backup Systems On a Per Vehicle Basis ($2006)

Due to the easily affected cost-benefit relationship, it is difficult to create one number or even a small range of numbers to represent these systems. In order to produce a meaningful understanding of these systems, a number of scenarios are presented in Table 3 to gauge the sensitivity of the assumptions made for those factors that we have the least amount of information. These should not be interpreted as NHTSA’s predictions for these devices, but rather possible predictions to show the sensitivity of the results. All variables “default” values above are kept, including an 80% driver factor.

Table 2 Net LifetimeBenefits of Various Backup Systems On a Per Vehicle Basis ($2006)

Due to the easily affected cost-benefit relationship, it is difficult to create one number or even a small range of numbers to represent these systems. In order to produce a meaningful understanding of these systems, a number of scenarios are presented in Table 3 to gauge the sensitivity of the assumptions made for those factors that we have the least amount of information. These should not be interpreted as NHTSA’s predictions for these devices, but rather possible predictions to show the sensitivity of the results. All variables “default” values above are kept, including an 80% driver factor.