New Vehicle Sales Remain Strong Despite Rising Fuel Prices

With the recent turmoil in the Middle East driving oil prices higher, some have speculated that new vehicle sales could take a nose-dive. In 2008, new vehicle sales fell when gas prices reached $3.50 per gallon.

National Automobile Dealers Association’s chief economist Paul Taylor thinks prices at the pump will have to reach $4.50 per gallon to make any measurable impact on new vehicle sales.

If Taylor is correct, we still have a way to go before another melt-down hits the auto industry. According to GasBuddy Organization, Incorporated, the national average for a gallon of gasoline reached $3.46 on Friday. The Minneapolis-based for-profit business operates 245 local fuel price reporting Web sites under its parent domain,

According to, the national average price for a gallon of gas stood at $3.12 per gallon on month ago and consumers were paying $2.71 per gallon a year ago.

Despite the unrest in the Middle East and an increase in prices at the pump, seasonally adjusted light vehicle sales rose in February to 13.44 million vehicles, a 28 percent increase from a year earlier.

Much of that growth came from the sales of smaller, more fuel-efficient vehicles like the Ford Fiesta which is EPA rated at 33 mpg. However, light truck sales are also up. San Antonio-based Jordan Ford has seen “explosive” pickup truck sales according to the dealership’s sales manager, Mack Dodd.

Dodd said many small car buyers are betting that gas prices will come back down and are choosing to hold onto their less-fuel-efficient vehicles instead of trading them in. “They’re not getting rid of their old cars,” said Dodd. “They know gas prices are going to go down. They want to be able to hop in something and go to work and not have to worry about fuel costs.”

Taylor said, “At each dime of gasoline price increase some consumers adjust their buying decisions, particularly for vehicle choice or at least engine choice. Generally it takes a level that consumers have not seen before. Gasoline prices in excess of $4.50 per gallon are likely to have a more dramatic increase upon consumer choices.”

He said rising fuel prices, combined with the soft real estate market could affect new vehicle sales if they continue through the rest of 2011. At $4.50 per gallon, consumers would spend $81 to fill up an 18-gallon gas tank. “At over $5.50 per gallon,” said Taylor, “it reaches $100. That would rivet the attention of consumers.”

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