By Danni Santana
After sliding around on icy roads all winter in Suffolk County, Stacey Mathurin and her fiancé are eager to buy a truck before next winter arrives. Cheap gas prices helped make their decision an easy one.
“We want a car with four-wheel drive for better safety,” said Mathurin. “Cheaper gas will make the 80 miles he drives round trip to work everyday less of a burden.”
Mathurin and her fiancé represent a large group of Americans who want to purchase vehicles now while gas prices remain low.
After slight increases in February, gas prices are now plateauing. As a result, auto sales are expected to reach record levels in 2015, easily trumping the 16.4 million cars sold last year.
“This year has gotten off to a very fast start, considering the harsh weather that hit parts of the country,” said Michelle Krebs, senior analyst at AutoTrader.com. “While we believe year-over-year sales increases won’t be as large as in the past few years, our sister site Kelley Blue Book and other analysts believe sales will reach totals not seen in more than a decade.”
Gas prices unexpectedly climbed 43 cents per gallon in February. The rise was caused by labor strikes at U.S. oil refineries, which slowed production, and the annual transition from winter-blend to summer-blend gasoline.
Analysts, however, consider the rise a small blip that will have little effect on auto sales this year. Going forward prices are expected to remain at current levels or drop close to amounts drivers enjoyed in January.
“The days of $2 gasoline are gone, but the current rise in prices are a short-term trend,” said Gregg Laskoski, Senior Petroleum Analyst at GasBuddy.com. “By year’s end, we’ll see a moderate increase in gas prices that will peak in July before going down again.”
Laskoski predicts prices will top out at $2.50 or lower in 2015, still a dollar less on average than Americans paid last year.
LMC Automotive, a forecasting firm in Michigan, predicts auto sales will eclipse 17 million cars sold for the first time since 2001. The firm’s Senior Vice President Jeff Schuster says improved weather in the coming months will help the auto industry rebound from a sluggish start to the year.
“We should see a strong spring selling season,” said Schuster. “Low gas prices will be an added catalyst as well. It will increase consumer confidence and their willingness to make larger purchases.”
The average age of vehicles on the road, currently at 11.4 years, also bodes well for auto sales. A study conducted last year by IHS Automotive, an auto industry research firm, found the average age of vehicles should rise to 11.7 by 2019.
The biggest reason experts are optimistic about auto sales this year is an improving U.S economy.
U.S. employers have added at least 200,000 jobs in each of the last 12 months. The 295,000 jobs added in February far exceeded economists expectations, a great sign for automakers. Jobs lead to housing starts and a necessity for vehicles to get to and from work. Unemployment is also at its lowest point since the spring of 2008, at 5.5 percent.
“An important metric of consumer confidence is employment and the job picture is steadily improving though wages have yet to follow much,” said Krebs. “We have seen an unprecedented six consecutive years of increased vehicle sales in the U.S and we don’t see it slowing down at all.”
What is sure to slow down in the coming months is the sale of gas-guzzlers. Late in 2014, Americans began favoring pick-up trucks and SUVs over passenger cars. A high demand of light trucks drove auto sales early in 2015 especially late in January when gas was at its lowest.
In February alone, light trucks accounted for 54 percent of the total 1.2 million vehicles sold. Now that prices have crept up again, the smaller vehicles that fell out of favor when prices first plummeted should replace gas-guzzlers as the vehicles Americans want most.
“If consumers take the slight increases in gasoline prices as a sign of even higher prices in the future, it will greatly affect truck sales,” said Yen Chen, senior research economist at the Center for Automotive Research. “Price increases reminded consumers that prices will not stay low for long and might’ve already changed consumer preference toward smaller and more fuel efficient vehicles.”
One senior sales manager at Westchester Toyota has already witnessed the change. Not as many highlanders are driving off his lot now compared to January. Instead, customers are purchasing more sedans, corolla’s and camry’s.
“Customers pay attention to gas prices,” he said. “If prices go down again we’ll sell more trucks. It’s that simple.”