Good news for the auto industry is not necessarily good for the people who buy cars. In January, people paid $38 billion for cars they bought, which TrueCar says is a near-record amount.
Further, the average amount people paid for those cars, known as the “transaction price,” was also up. As The Detroit Bureau reported, Kelley Blue Book put the jump at 2.8 percent, up $919, to $34,112. TrueCar had it slightly different, a $551 increase, 1.7 percent, to $33,155 (the two firms track data differently).
Heart rules over head in buying new cars, which is why we end up with impractical SUVs. (Photo: Juan Calderon/flickr)
So why are people paying more? Inspired by low gas prices, we’re buying big and expensive SUVs and trucks, and abandoning small cars and minivans. And we’re larding on option packages. In short, we’re being chumps — buying into dumb ad campaigns and choosing cars on image, not our actual needs.
Those SUVs are herd cars, even though those Super Bowl spots convinced us they set us apart from said herd. They fill every parking lot, but somehow we’re sold on the idea that buying one is an expression of individual identity. We pay extra for fuel-wasting all-wheel drive, though we never go off-road. I note that traffic on Edmunds.com for people looking to buy a humongous Honda Ridgeline truck was up 275 percent after the Super Bowl ads.
There are plenty of other signals of what’s happening. Guess which vehicles depreciated least at auction? That’s right, used full-sized SUVs. This is the same exact category that couldn’t get arrested when gas was $4 a gallon.
The situation is rather extreme — used subcompact-based luxury crossovers saw a big 21 percent drop-off. Evidently, they’re not big enough. And subcompact cars were down even more at 23.3 percent. Fuel economy is disappearing from the top 10 of buyers' concerns.
After the Super Bowl ads, everybody wanted a Honda Ridgeline. (Photo: Honda)
People, people, this is a very bad trend, and quite short-sighted. C’mon, be realistic. How many of you readers really think that we’re now going to see low gas prices forever? It’s cyclical, and the pendulum will swing back viciously. Then you won’t be able to give away that big boat you bought. Not so long ago, in 2008 and 2009, people were dying to sell their Hummers and finding no takers.
That said, it’s likely you’ll be able to enjoy that gas guzzler for a while. The Energy Information Administration predicts that prices will average $2.03 in 2016 (down from $2.43 in 2015), and then climb to $2.21 in 2017.
Those Range Rover Sport pitchmen see you coming. (Photo: Land Rover MENA/flickr)
GasBuddy, a usually reliable source, is somewhat less optimistic. It thinks prices will average $2.28 in 2016. But … it could be a lot worse than these reassuring projections. GasBuddy sees a lot of volatility in the oil market. For instance, could Iran start pumping a lot more black gold, now that sanctions are coming off? That reduces prices even more. But Saudi Arabia could also finally throttle back on production, which would push prices up in a big way. Hurricanes could also hurt gas supply and refining.
The smart car buyer won’t yo-yo between big cars and subcompacts, losing money with each panic sale. Plan ahead, don’t get caught by big swings in the market. The best bet is to buy a car you like with good fuel economy, then keep it for the long haul as the market seesaws.
Here's a medley of car and truck ads from Super Bowl 50, including that Honda Ridgeline spot. The sheep metaphor is apt: