How should falling gas prices affect which car you buy?
Over the past several months the price of gas has fallen from a peak average of around $4.25 per gallon in the Los Angeles and San Francisco Bay areas to about $3.00/gallon, with even lower prices in the rest of the country.
Gas prices over the past 12 months
Resulting car buying trends
For many consumers, lower fuel prices can make trucks and SUVs more attractive while making hybrids and electric vehicles less compelling. Nationwide, sales of Toyota 4Runners were up 53% in November, while the ever-popular Prius was down almost 14%.
Bloomberg Businessweek recently ran an analysis of payback periods for the Chevrolet Cruze vs. the Toyota Prius and the Nissan Leaf. They found that at current gas prices, it would take almost 30 years for the fuel-savings on the Prius to compensate for its higher initial cost, while the Leaf would take about 3.8 years.
While it’s easy to think in the short term about the price at the pump, most Americans plan to keep their vehicles for a number of years. Even those who prefer to lease will be driving their new cars for an average of three years which is more than enough time for gas prices to fluctuate.
Gas prices over the past 6 years
The price of gas has both fallen and spiked too many time to count over the last six years. However, in the aggregate, it has gone up about $1 per gallon. It makes sense to assume a higher average gas price than we’re seeing currently when making a decision that will affect your budget for the next several years.
What Cartelligent clients are choosing
We looked at our own data to see how recent gas prices are changing what Cartelligent clients are deciding to drive. What we found was fairly surprising—so far, our clients haven’t changed their car choices as a result of falling gas prices. We looked at a number of data points and compared the first six months of this year when prices were high and October to date since prices have been dropping.
- Average MPG: The average MPG of all cars sold was virtually identical at 26.2 mpg over both time periods.
- Gas Guzzlers: The percentage of “gas guzzlers” (as defined by the EPA) actually fell from 0.7% to 0.5% of total vehicle sales.
- Under 18 mpg: Vehicles with a fuel economy under 18 mpg fell from 5.4% to 4.5% of total sales.
- Over 30 mpg: Vehicles with a fuel economy over 30 mpg fell from 21% to 20% of total sales.
- Electric Vehicles: Electric vehicle sales have risen from 2.3% to 3.8% of total sales.
- Toyota Prius: Sales of the ubiquitous Prius have remained flat at 3.6% of total sales.
- Nissan Leaf: Sales of our most popular electric vehicle have doubled from 0.6% to 1.2%.
Part of this results from our client base—Californians in general tend to prioritize environmental impact and will often prefer the greener option where possible. Part of it also comes from consulting with a car buying expert; their Cartelligent agent helps them look beyond the short term price of fuel and make a decision that will meet their financial budget for the period they plan to drive the vehicle.
How does this affect your decision?
What does all this mean and how should it affect your next vehicle purchase? The bottom line is that you should get the car that works best for your specific circumstances. Do you have a long commute every day? A fuel efficient vehicle will still be a strong option for you even if gas prices remain low. Do you have a large family or need to pull carpool duty regularly? You’ll benefit most from an SUV or van that may be less fuel efficient than the average vehicle. Are you passionate about the environment or reducing our dependence on oil? Look into whether or not an electric vehicle will work for you.
Ultimately, it’s safe to predict that gas prices will rise again. Even if they remain low, there are a number of benefits to choosing a vehicle that will minimize your fuel consumption as long as it meets the rest of your needs.
Whether or not you're looking to get a fuel-efficient vehicle, Cartelligent can help you get a great deal on exactly what you want. Call our team of car-buying experts at 888-427-4270 or get started today.