Consumers Shrug off Higher Gas Prices for Now Featured

Gas prices continue to rise, topping $3 a gallon in most parts of the country.

But so far, there has been little effect on the used-car business.

“We’re good for now,” said Zohaib Rahim, manager of economics and industry insights for Cox Automotive.

A quick poll by Kelley Blue Book finds that almost half of consumers expect no change to their driving habits even with higher gas prices and only a third would consider a more fuel-efficient vehicle for their next purchase.

That is good news for the manufacturers, as they invest more and more of their fortunes on larger vehicles. They can do this because today’s technology improves fuel efficiency without sacrificing size.

For example, Ford Motor Co. recently announced it would stop production of its Fusion and Taurus sedans. The company can do this part because its crossovers get the same miles per gallon at the soon-to-be discontinued cars.

This is true of vehicles of all sizes.

Jonathan Smoke, Cox Automotive’s chief economist, said the annual fuel premium for driving a compact SUV versus a compact car was more than $300 in 2008. At that time, higher fuel prices did create chaos on dealer’s lots as consumers opted for smaller vehicles and large units sat unsold.

But the premium was down to $191 in 2017. This breaks down to roughly $16 a month, Smoke said. Even with gas prices 21 percent higher now, the incremental increase in the premium paid is $34 a year, or less than $3 a month.

“Will consumers suddenly abandon ride height and greater utility for the cost of a coffee?” Smoke said. “I don't think so.”

So, for now, the industry is OK. But Rahim did warn that is gas prices pass the $4 mark, consumers might start changing their buying habits.

Last modified on Friday, 18 May 2018 14:15