The Tipping Point on Gas Prices Keeps Moving

Is the run up on gas prices affecting the behavior of car shoppers? Not all that much, according to comments last month from Bob Schnorbus, chief economist at J. D. Power & Associates. He told U.S. News and World Report that consumers have not yet fled larger vehicles. “If $4 gas is only short-term, people will do what they’ve been doing the last five years: complain but keep on buying.”

Maybe the realities of high gas prices have already shifted from short- to long-term. A survey from AAA, released this week, suggests that gas mileage has become the number one consideration for American consumers in choosing a new vehicle—even more important than which automaker produces the car or truck.

“The survey results clearly demonstrate that gas prices have reached levels sufficient for consumers to dramatically alter their driving behaviors and car-buying habits,” said Kathy Harrison, vice president and chief public affairs officer for AAA Michigan. Gas prices are up 70 cents from a year ago.

Yesterday, J.D. Power’s Schnorbus told Detroit News that rising gas prices last year did not show a dramatic impact on vehicle selection. But this year looks different. There was a 35 percent increase in sales of subcompact cars in February 2007 compared to last year. Schnobus said, “I think that surprised all of us. Is $4 the new threshold?”

There’s further evidence from a March study of consumer attitudes by Kelly Blue Book, which showed that 58 percent of car consumers said gas prices have strongly influenced their purchase decision—an 11 percent increase since February.

The most recent AAA survey confirms the phenomenon of a moving tipping point. “I think a lot of analysts were saying we’d hit the tipping point at $4 a gallon,” said Jim Rink, an AAA spokesman. “I think this suggests we already have.”


  • Skeptic

    It’s not absolute price level, it’s rate of rise.

    If gas goes to $4.50/gal tomorrow (and stays above that point) people will abandon their Hummers in place.

    If it goes to $4.50/gal over the next year or 18 months, then … meh. People will likely buy higher mileage cars, but not until they’re usual “tech refresh”.

  • Gerald Shields

    I’m skeptical of that skeptic. I say the exdous from the Hummers is already occuring. I live in Seattle which is the 5 largest U.S. market for the Toyota Prius and I see them everywhere. However, $4.50/gal doesn’t help the bottom line either.

  • Carl Linley

    The problem is that with a sluggish economy people will keep a car as long as possible.
    It does not pay to replace a vehicle just for better mileage. When the time to replace a car came we did buy the one with the best mileage FOR THE CATEGORY.
    My anual mileage is less than 5000.
    Gas would have to go to 20 dollars a gallon to make it worth while buying a prius and then I would wait for a 4WD version.

  • Mikek

    I think Carl has the right point.

    The interesting question isn’t whether or not people are buying higher mileage vehicles.

    It is how many fleet miles per year are being replaced with high-mileage vehicles.

    A grandmother who buys a prius at the normal “refresh” time but only goes 2 or 3 thousand miles a year isn’t the issue.

    It’s the commuter putting 20k miles per year on their car. What cars are they buying?

    Mike

  • steved28

    I must admit, I didn’t go out and buy my hybrid (Altima) solely on the price of gas. I was up for a new vehicle last year. I had decided on a mid sized sedan already. As far as I was concerned, the extra $4K was not something I was looking to recover quickly (although I will, as it turns out). I would rather put the money in Nissans bank account than Exxons.

    My tax person just informed me I’ll be getting my $2350 btw. And by my calcs I am saving $1500 annually on fuel at current prices. One more pleasant surprise, apparently MA doesn’t know hybrids cost more, my excise tax bill was based on a 4cyl Altima. They did not have a class for hybrid models (which would have been valued higher and taxed higher).

  • Jeff

    Well I commute and shuttle school kids on a regular basis so when my 1995 Satrun wagon died with only 125,000 miles on it I bought a Prius. So here is one commuter puting over 20,000 mile/year on a vehicle who chose a Prius.

    By the way Carl I live in Alaska and drove all winter on plain street tires with no traction problems. Plenty of 4WD SUVs and trucks sliding past me at intersections. Who needs 4WD? (Not many people). I also own an F-150 with 4wd to tow our horse trailer and boat when needed but feel safer in the Prius. (I would sell the truck if my wife would let me get rid of the boat and horses)

  • cliff lapp

    Hi!

    When you are looking at a hybrid and it’s higher cost, you’re NOT choosing between sending your money to Exxon/Mobil or Toyota, for example.

    What you ARE doing is choosing between sending you money to Muslim fundamentalists that want to kill us (Americans), or sending your money to Toyota.

    It’s your choice!

    cliff
    YIP
    PS-Right now, Saudi Arabia (the #1 source of Muslim Terrorists, and Muslim Terrorism Funding, could buy ALL of GM with only SIX DAYS of oil revenues!!!