Sales of SUVs, Light Trucks Soar on Low Gas Prices
As gas prices have plummeted over the past six months, sales of SUVs and light trucks have soared. That’s certainly not a coincidence, but does it mean that buyers of these vehicles are making a mistake because prices at the pump are likely to rise again? Not really, according to auto industry experts.
“Most of the newer SUVs are not the gas guzzlers that people used to think of,” said Jessica Caldwell, senior analyst at the car shopping website Edmunds.com. “In fact, some are quite fuel efficient.”
Still, it’s not a surprise that there is a correlation between the price of gasoline and the rise in SUV sales. Over the last four months, Edmunds says SUVs and light trucks have captured 54 percent to 55 percent of the new car market. That’s up from about 51 percent in the first four months of 2014, when gas prices were more than a dollar a gallon higher than they are right now.
Caldwell says that many buyers of crossover SUVs may have bought midsize sedans in the past, so the move into the SUV market is not a big step up in price. Many popular crossover models sell for $25,000 to $30,000 — about the same as those midsize sedans they have been driving, and their mileage per gallon ratings are not that much worse.
Lower Interest Rates, Longer Loans
Edmunds also notes that economic conditions benefit shoppers. The average interest rate on loans for new cars was a relatively low 4.5 percent last month, and the average loan was for a record high 67.2 months. Edmunds says that combination means buyers are able to “get more car” for about the same monthly payment as they had made in the past.
“I would say most folks are making rational decisions,” said Alec Gutierrez, senior analyst for Kelley Blue Book’s KBB.com. “Purchases are not solely being made on where gas prices are today. When gas prices do jump back up, I don’t think it will impact these buyers in a serious way.” He says there are some people making decisions based on the “wrong math,” but that’s not the major factor driving sales. In fact, KBB.com says the average SUV sold today is 26 percent more fuel efficient than a comparable one sold back in 2007.
“Some people may be lured to something larger because they are saving on gas right now,” said Caldwell, “but buyers should make their decision based on affordability,” whether than can afford to drive that new vehicle at $2 a gallon or $5 a gallon. She says you’re likely to drive a new car for the next 5-to-10 years, and we’re likely to see a fluctuation in the price of gas over that time.
Hot Crossovers
Among the hot selling SUV crossovers are the Honda (HMC) CR-V, Toyota (TM) Highlander, Toyota RAV4, Ford (F) Escape, Buick (GM) Encore, Subaru Outback, Subaru Forester, Mazda CX-5, Jeep Cherokee (FCAU) and Hyundai Santa Fe.
“In general, the quality is pretty good,” according to Caldwell. “It’s a good compromise. Fuel efficiency is good, the seat is higher. It check off a lot of boxes for consumers.”
Gutierrez notes that midsize and larger SUVs have also rebounded as gas prices declined, with some models posting double digit sales gains from a year ago. He points out that two market leaders, the Chevy Tahoe and the Chevy Suburban, also benefited from redesigns last year.
“While gas prices are certainly an influence,” says Gutierrez, “there are also new models, great incentives, and the new home market is doing very well, which gives a boost to truck sales.” He expects the SUV/light truck market to grow at nearly double the overall rate for new vehicles this year, even if gas prices go back up a little bit.
Prices for used SUVs and light trucks are are pretty high because demand exceeds supply right now. That’s partly because sales of SUVs plummeted during the recession years of 2008 through 2010, so there are not enough 5- and 6-year-old models being traded in right now.
[source : dailyfinance.com]