Car Registration

[kandrathe]

1) Likely to get you to buy a smaller car, which may have a better mpg (small cars tend to be cheap, small cars tend to get higher mpg). And bigger, more expensive cars do tend to cause (slightly) more wear and tear on the roads.
2) Probably not, but it's an incentive to not buy a $100000, 10 mpg tank.
3) If it's on your papers from an official source, then it's as legal as your normal income tax.

Besides, this kind of scheme can reduce road tax. All in all, it's likely designed to make you think about the vehicle you're going to use.

Actually, it has less to do with mpg, and more to do with progressive taxation. The better your car, the more you can afford to pay in taxes.