Would $4.50 A Gallon Gas Keep You From Buying A Truck? Probably Not
According to AAA’s Daily Fuel Gauge Report website, the average gallon of regular gas costs about $3.59 today. According to a recent study by Experian Automotive, a $1 increase in the cost of a gallon of gas would have minimal impact on consumer buying behavior.
if gas prices increased by $1, in an average month with 1 million unit sales, the Small-Car Economy segment volume would increase by 7,000 units. Conversely, the same price increase would cause the Full-Size Pickup Truck segment to lose [5000 sales]
That’s right – according to Experian, $4.60 per gallon gas would barely effect new truck sales. Does that sound right to you?
New Truck Buyers Aren’t Worried About Gas Prices
When you buy a new truck – any new truck – you’re making a conscious decision to spend a considerable amount of money. Even if you buy the most miserly fuel-sipping pickup on the road, you’re still going to spend a considerable amount on fuel…some math.
Scenario #1 – We drive 1,000 miles a month and we’re getting 20mpg in our fuel-sipping full-size, so we need 50 gallons of gas. If gas costs $3.50 a gallon, we’re going to spend $175 on gas. Our truck costs $30k brand-new, so our truck payment is about $600 a month, and our total expense is nearly $800 a month.
Scenario #2 – We drive 1,000 miles a month and only get 15mpg in our run-of-the-mill pickup, so we need 67 gallons of gas. At the same $3.50 a gallon, we’ll spend $234 on gas. Our truck cost about $30k brand-new, so our payment is the same $600 a month, and our total expense is essentially the same $800 a month.
Scenario #3 – We drive 1,000 miles a month and get 35mpg in a fuel-sipping economy car, so we need about 29 gallons of gas. That’s just about $100 a month on fuel. Since our economy car cost less than $20k, our payment is $400…and our total monthly expenditure is close to $500.
As you can see, new truck owners spend 50-60% more on their vehicles than new car owners.. If you’re buying a new pickup, you’re committing to a major expense…which means that either:
- You NEED a truck and the expense is just a cost of doing business or
- You’re well-off enough that you don’t have to justify the additional expense of buying a big vehicle
Either way, are you going to care enough about a $50-$75 increase in fuel prices to buy a Corolla instead of a Tundra? No.
As for the new truck buyers who are forking over $40k+ for a new luxury crew cab…forget about it. Those buyers don’t care about $75 a month in additional fuel prices any more than my wife cares about spending an extra $5 on organic produce (no matter how much I complain, I might add…).
The point? Experian’s data showing that new vehicle consumers don’t care about gas prices nearly as much as everyone thinks they do makes a lot of sense. Which is probably why I was able to make this argument years ago without doing any complicated analysis (see Gas Prices and Truck Sales Aren’t As Related As We Think from 2009).
What About Used Truck Buyers?
The math behind buying a used truck is a bit different. First of all, used truck buyers are generally focused on reducing expenses (that’s usually why they’re buying a used vehicle). Second, used truck buyers are less likely to be business owners, as the tax rules generally make new vehicle purchases a better choice.
Still, a $1 increase in fuel prices adds the same $75 a month (or so) in fuel costs, and that’s just not a lot of money for a person who can afford to spend $20k on a used pickup ($400 a month car payment). It’s painful, but not so painful that it changes behavior. After all, if you need a truck, you need a truck…you can’t pull your boat with a Camry, haul your ATV with a minvan, etc.
Basically, when it comes to truck sales, gas prices really don’t matter…which is why Toyota didn’t bother with rolling out advanced fuel-saving features on the 2014 Tundra. These fancy technologies are great when it comes to bragging rights, but they don’t effect consumer choices.
Filed Under: Buying a Tundra