Old habits come back
Host Mary Walden asks about a boom in the vehicle buying, sales of all vehicles, including larger vehicles on the rise. She asks why gas prices of over $3 are discouraging consumers buying big cars and trucks. Her husband, N.C. State economist Mike Walden responds.
Mike Walden: “And indeed, Mary, it was thought that high gas prices would actually doom, eventually, the sales of big cars and big trucks. But that’s not really happened. In fact if you look at dealerships, the big vehicles are the ones that are really being sold at high volume.
“I think a couple of things are going on here. One, although gas prices certainly have not gone back down to $1.50 or $2.00 a gallon and probably never will, their sharp rise has stopped. We’re in this range right now somewhere between $3 and $3.50 a gallon. A lot of people think that’s going to stay there for a good long time. So, I think people have adjusted, and they’ve adjusted their budgets. I think that’s one impact, one reason.
“The other is fuel efficiency. All vehicles, even large vehicles, have dramatically improved their fuel efficiency so it’s not as expensive to fill up those big vehicles, fill up fuel in those big vehicles. And a third factor I think is simply that this buying of large vehicles — large trucks, large cars — goes along with the economic notion that people like more.
“They like more in their housing square footage, they like more food, and they like more vehicle on average. And so that desire is coming back, as the economy and the buying of vehicles has changed. Now all this certainly could go in reverse if gas prices for some reason spike. But I think barring that, we’re going to see the buying of big cars and big trucks here to stay.”Category: Economic Perspective