Three states have already passed the $4-a-gallon mark for gas: Alaska, California, Hawaii. Three more—New York, Connecticut, Oregon—look like they’ll be next. By springtime, $4 is expected to be the average price for a gallon of regular nationwide. When gas prices are high, drivers may limit time on the road, or perhaps scale back on discretionary spending to compensate. But even as consumers have less money to spend because gas is so expensive, they can expect to pay higher prices for many car models.
It’s a simple cause-and-effect: As fuel prices rise, demand for fuel-efficient vehicles does the same.
A new press release from Kelley Blue Book describes the current scenario, in which dealerships are highly unlikely to budge on price or bother offering incentives on cars that get the best mileage. As for consumers thinking of buying a hybrid or fuel-efficient compact:
They should not expect dealers to offer significant discounts. In both 2008 and 2011, Kelley Blue Book saw monthly market share for compact cars increase by more than 3 percentage points when fuel prices peaked, and as more consumers flock to compacts, prices will remain firm.
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Used cars are the obvious less expensive option, but soaring gas prices can have an even bigger impact on used car prices than they do on new models. Early last summer, in the midst of spiking prices at the pump, used car prices hit all-time highs.
Kelley Blue Book warns that buyers in the market for used cars “can expect to see even more significant price increases in the months ahead if gas prices continue on their current upward trajectory.” Soon, then, average used-car prices could top the highs hit last summer.
With few compelling options, most drivers will probably elect to stay put and stick with the status quo for the time being. That’s even the case for drivers behind the wheels of large, gas-guzzling trucks. IHS Automotive analyst Rebecca Lindland tells the Wall Street Journal that consumers tend to change behavior quickly when gas prices spike, and change less so—or not at all—when gas prices rise more slowly and steadily. Even when they do change, they tend to go back to their old habits within a few months, regardless of the price at the pump. As for swapping an old SUV for a more fuel-efficient substitute, most drivers will feel that’s not the best swap, especially given how expensive used cars are today:
“If that old SUV is paid for, running well, and not costing a lot to maintain, you’re going to keep it,” Lindland said.
There is one group of consumers who could find a good buying opportunity, though: people who don’t drive all that much. Last spring, when gas prices skyrocketed, a marketing professor published research indicating that cars with bad gas mileage become bargains when gas prices rise:
“On average, prices of fuel-inefficient used cars fall a lot and those of fuel-efficient used cars rise a lot when gasoline prices increase … So if you drive a lot be aware. But if you drive a little, you should buy a used fuel-inefficient vehicle when the gas price goes up.”
I’d love to see the reaction you’d get walking into a dealership and specifically requesting a “fuel-inefficient vehicle.”
Most people, of course, want the best mileage possible. The vehicle’s EPA rating may not be the final word on the topic.
Consumer Reports recently listed its “overachievers” club—cars that actually got mileage in their studies that was better than their official EPA fuel-economy ratings. Two Hondas—Civic LX and CR-Z EX (manual)—both got 8 more miles per gallon on the highway in CR’s road test than what’s listed by the EPA. Likewise, the Ford Fiesta SE sedan, Toyota Camry LE, Toyota Corolla LE, and Scion xD (manual) all did significantly better mileage-wise during CR’s tests.
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