Gas Prices: "Driving" You To Buy A Different Car?


As I've been talking about for some time, and as we've seen from auto sales in the last couple of months, the price of gas IS causing people to shift the kinds of vehicles they are planning to buy. The latest evidence comes from Kelley Blue Book.

The firm surveyed potential car buyers and 44 percent say they changing the types of models they are looking at because of higher gas prices. Increasingly, they are looking for compact cars, hatchbacks, and yes hybrids.

This survey might surprise people who has seen gas prices pull back in the last couple of months, but in my opinion the results are perfectly understandable. Do you really believe gas prices will stay down or pull back even further? I don't. And I don't think I'm alone. I am by no means an oil trader, but from everything I've seen, I think oil and gas prices will stay at current levels and likely go even higher.

What the survey doesn't address is whether people are postponing buying a new car or truck. I suspect that's happening. Just from talking with friends and neighbors, there is an attitude of, "I don't need a new car, so I won't look for a new car."

This is why estimates for auto sales in 2008 continue to slide lower and lower. Some are now expecting sales to drop down to 15.5 million, which would be about 600,000 vehicles below the pace we're on for this year.

And don't expect the automakers to try and pump up sales with outrageous offers. They are getting religion, and will cut production before gutting profits with fire sales. So get ready for a long cold winter with little to entice people back into showrooms and little reason to look at bigger models given the cost of gas.

Questions? Comments?