Gas Prices Fueling Price Spike On High-Mileage Hybrids, Small Cars

March 16, 2011
Gas At $4.89

Gas At $4.89

Gasoline prices are on the rise. And as surely as we can say that more Americans will start putting half-tanks into their cars and complaining loudly about the extra $20 or so a month they'll need to shell out—and schemes like drilling into fuel tanks emerge—let the rush on small cars resume.

According to, the U.S. average retail price is about $3.53—that's up nearly 40 cents from a month ago—and they've already climbed nearly 35 cents in March due to the political turmoil.

And in this almost farcical, yet predictable turn—yes, it does seem that U.S. motorists have a very short-sighted take on the energy market—small cars and hybrids are suddenly looking like the stars of the showroom again. Even though hundreds or thousands might be lost in the trade.

It's a trend that's already being noted by the National Automobile Dealers Association (NADA) and its NADA Used Car Guide. According to them, auction prices for used vehicles are up one to 3.7 percent during February, with compact cars up the most overall—about 3.1 percent on average—and SUVs among those with the smallest gains. For compacts, that's a huge jump in a single month, and an indicator that used-car shoppers are scrambling for more fuel-efficient cars. And in price-pinching cases such as this, it's likely some major changes in the new-car market aren't too far behind.

Civic, Prius prices spike

According to NADA, citing AuctionNet used-car sales data, some small cars (like the Honda Civic and Chevrolet Cobalt, they cite) are poised for increases of up to six percent in March as truck prices have stabilized at a time of year when they would normally rise somewhat.

They're also seeing prices rise for used hybrids such as the Toyota Prius. Prices on the Prius have settled a couple of years, yet so far this year they've risen again, with cars at auction earning about $1,700 more through February, compared to November 2010. NADA points to a price spike just over the past week.

"Because of the recent spike in fuel prices, values for used compact and mid-size cars are increasing dramatically compared to the rest of the market," said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide. And with production disruptions in Japan, from the recent earthquake-and-tsunami disaster, Banks expects that prices for compact and mid-size cars will keep rising.

Not an about-face, like 2008

But even with those factors, Banks doesn't think that prices will swing quite as dramatically as they did in 2008. "Barring an extreme increase in gas prices driven by a potential domino effect in other Middle East and North African countries, it's unlikely that used-vehicle prices will experience the extreme volatility seen in 2008," he said.

We've seen with past price upswings that it's volatility, not the prices themselves, that scare shoppers into other types of vehicles. Last year prices continued a gradual rise, but there was never a rapid price spike like this and consumers remained largely attached to larger vehicles. While prices remain far below the $4.13 national average they reached in June 2008, the price swing of recent weeks might have been enough to scare drivers back to the showroom.

What would it take to get you to seriously think about downsizing or moving to a more fuel-efficient vehicle?


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