Rising Fuel Prices Equals More Car Sales in March
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Are new car payments better than filling up an older gas tank? If current vehicle sales are any indication, the answer is yes. In the past vehicle sales have declined when gas prices have spiked. However, rising fuel prices have not held back American auto sales in the past month. The three big Detroit automakers saw positive sales numbers, and even record high sales numbers in March 2012. Chrysler, Ford (NYSE: F), and GM (NYSE: GM), all agree that buyers are choosing to make new car payments on fuel-efficient vehicles, rather than continue to pay for more fuel in older vehicles.
"The combination of credit availability, an improving economy, pent-up demand and even high fuel prices encouraging people to acquire newer, more fuel-efficient vehicles are all helping to drive industry sales," said Reid Bigland, head of U.S. sales for Chrysler, as quoted by CNN.
Never before have so many smaller, fuel-efficient vehicles, and crossovers been available. For the month, Ford estimates that the industry altogether sold 1,445,000 vehicles in the U.S. Industry sales increased approximately 14% in March over the year-earlier. Consumer desires for more fuel-efficient vehicles or smaller cars, accounted for about 24% of the industry in both February and March. That is an increase of over approximately 20% of the industry sales for the full year in 2011.
The Ford Explorer with EcoBoost made up 12% of Explorer sales, delivering the highest Explorer sales in the month of March since 2001. The 2012 Ford Explorer with EcoBoost rates 28 mpg highway, according to Consumer Reports. The 2009 Ford Explorer rates approximately 20 mpg highway (source). The 2009 model features a 22.5 gallon tank, which at current fuel prices averaging $3.92 per gallon, the car fills up for $88.20, and will last approximately 450 miles. The 2012 model with EcoBoost, has an 18.6 gallon tank, and fills up for approximately $72.91, and goes roughly 521 highway miles. That's a difference of $15.29 per fill up, which, if a driver fills up twice a month (24 times a year), is $366.96 saved in a year, or a little more than $30 per month. Considering the Explorer with EcoBoost not only saves a driver $30/month, but also drives 70 miles longer, it isn't hard to see why so many consumers are purchasing newer vehicles, rather than sticking with older models.
Ford can also thank the fuel efficient Focus for a 5% improvement in sales, with its highest March sales since 2007. The Focus enjoyed a 67% increase in sales over the year earlier. Ford also noted that its 2011 U.S. numbers were the highest in thirteen years.
Small cars sold better than before, but the automakers also saw excellent sales from larger vehicles designed for better fuel economy. Sales of the Ford Edge increased 13% to 14,058 vehicles for the best ever March performance for the car.
GM enjoyed a 14.2% rise in sales over the year-earlier with more than 100,000 fuel-efficient cars (defined as vehicles with 33 mpg or better highway performance) sold in the US. The company attributed the spike in gas prices and an improving economy for the increased number of sales in fuel saving vehicles. GM's improved sales come after domestic auto sales for the company fell 6.1% in January. The company sold only 167,962 vehicles in January, down from 178,896 in 2011 and 28% less than December. The high gas prices in March clearly did not hold the company's sales back.
Soaring fuel prices didn't hurt Chrysler either. The company had its best month since March 2008 with 163,381 cars and trucks sold, for an improvement of 34% over 2011.
Detroit is ahead of the game this time with providing the right types of vehicles for consumer's needs. The rising fuel prices should not hold consumers back from purchasing new vehicles, and they shouldn't hold anyone back from investing in American automakers either. With automakers ahead of the curve on this one, this is a great time to consider long-term investments in Detroit.
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