Do Gas Prices Really Influence Which Car You Buy?

Report analyzes relationship between fuel cost, auto sales

Sports Utility Vehicle SUV

ALEXANDRIA, Va. -- Fuel prices do not appear to significantly influence the types of vehicles consumers choose to purchase, a newly released report by the Fuels Institute suggests.

Over the past five years, the average price per gallon of regular unleaded gasoline has fluctuated dramatically, and some media outlets have suggested that when gas prices escalate, consumers shift to purchasing more fuel-efficient vehicles. Conversely, when gas prices drop, consumers shift to purchasing vehicles that are less fuel-efficient. The Fuels Institute’s report, which evaluates market data and analyzes the relationship between vehicle sales and retail fuel prices, indicates that this relationship may not be as direct as some have inferred.

“We know that consumers are extremely price sensitive and shop for gasoline based on price, and that the price per gallon affects their overall feelings about the economy,” said John Eichberger, executive director of the Fuels Institute. “This report set out to examine whether consumer behavior is influenced by prices at the pump when it comes to how consumers shop for a vehicle. In short, the report finds that factors other than fuel may have more of an influence on a consumer’s decision to purchase a specific type of vehicle.”

To analyze whether fuel prices are influencing the types of vehicles consumers are purchasing, the report examines sales trends for vehicle segments including small cars, electric vehicles, hybrids, large cars, crossover utility vehicles and sport utility vehicles (SUVs).

The analysis found that sales of crossovers and SUVs do not seem to be significantly influenced by retail fuel prices, indicating that consumers consider other more influential factors during the sales process. For example, data shows that sales for SUVs have increased 51% from 2010 to 2014 and have been relatively stable despite fuel price volatility. Conversely, sales of alternative fuel options, like battery electric vehicles, hybrids and plug-in hybrids, which typically deliver more miles per gallon than similar gasoline vehicles, do not seem to experience a significant increase in sales when fuel prices rise.

“Consumers continue to pay attention to gas prices, but our research does not support claims that they are basing a vehicle purchasing decision solely on the price at the pump,” said Eichberger. “Furthermore, the data calls into question media assertions that consumers are moving away from alternative-fuel vehicles to less fuel-efficient models in response to lower gasoline prices. There are factors at play that cannot easily be explained by examining gas prices.”

The Fuels Institute, founded by the National Association of Convenience Stores (NACS) in 2013, is a non-profit research-oriented think tank dedicated to evaluating market issues related to vehicles and the fuels that power them. It incorporates the perspective of interested stakeholders affected by this market, including fuel retailers, fuel producers and refiners, alternative and renewable fuel producers, automobile manufacturers, environmental advocates, consumer organizations, academics, government entities and other stakeholders with expertise in the fuels and automotive industries.

Click here to download the full report.