Taylor Says Impact of Higher Gas Prices on Car Buying is Modest


McLEAN, Va. (April 13, 2005) - NADA Chief Economist Paul Taylor notes that higher gas prices are just one of many factors in the vast majority of consumer vehicle buying decisions, contrary to some news reports.

Taylor said:  “Any adjustments by car buyers are modest and based largely on long-run expectations. There is not a stampede-like reaction to current elevated gas prices.  Consumers no longer expect the return of a dollar-per-gallon gasoline, but their long-term average price expectation is likely at $2 or less.  Consumers are making rational choices of vehicles based on the total cost of owning and operating a vehicle. The overriding trend is that the market has been moving toward Crossover Utility Vehicles (CUVs) since 1999, and that trend continues this year. In the first quarter, CUV sales have increased 15.5 percent, while large domestic truck-based SUV sales fell 15.1 percent and overall truck-based SUV sales dropped 14.6 percent. In 2004, CUV sales rose 16.6 percent, while large domestic truck-based SUV sales fell 1.2 percent and overall truck-based SUV sales were down 2.9 percent. It could be argued that the sales trend for large domestic truck-based SUVs is just starting to catch up in the last three months with overall SUV sales trends of several years. It also may reflect less generous incentives for full size domestic SUVs. The customers are gravitating to the new products, and those are largely CUVs. That has been the trend for the last six years."

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