Is now the best or worst time to buy a hybrid like the Prius?
It is often said that those whom ignore history are doomed to repeat it. Using history one might call hybrid shopping today panic buying. With gas prices rising and supplies of popular hybrids declining because of production problems in Japan, many are rushing to buy hybrids even as hybrid prices are rising. The past, however, has proven it's better to wait for calmer times.
But does history always repeat itself?
This weekend I went hybrid shopping to find out what's going on in Southern California, particularly regarding the king of hybrid cars, the Toyota Prius. Overall, there is about a 2 month supply of Prius hybrids in the US, although some dealerships are nearly out of their current supplies – and that trend was developing before the production shutdown in Japan. However, production of the Prius is going to fall behind about 2 months according to the sale's staff at my local Toyota dealership.
Hence, if gas prices keep driving greater than normal hybrid demand, then the Prius and other hybrid cars could fall into short supply. As a result, most Toyota dealerships in the Southern California area are pushing MSRP as a non-negotiable price, although my shopping experience suggests some deals still might be available, but probably not for long nor for much below MSRP.
Yet, what happens if gas prices continue to increase, even significantly? Could demand overwhelm supplies even when production is back on line? Might that lead to the kinds of dealership add-ons that led to markups as high as $5,000 atop MSRP just a few years ago?
When I asked about markups this weekend, the salespeople at each dealership I visited said that wouldn't happen because it's bad customer service. Coincidentally, each of the dealerships I visited did resort to markups back in 2008. So, I'm not sure how much I believe any of them.
However, even if rising gas prices do eventually lead to dealer markups, many would contend that just as in 2008, the gas price bubble will burst, causing demand and prices of hot hybrids to decline. Therefore, the likes of Cars.com and USAToday believe that hybrid buyers should hold back today.
But are they are right? Could this historical reasoning be wrong this time around?
Earlier today in $4.00 gas starting to look average I noted how energy traders and analysts are starting to take the current oil spike ever more seriously. In a nutshell, $100 oil seems here to stay for at least several months based largely on Libya and Japan. But the real worry continues to be the tensions escalating in Yemen, Bahrain, Syria, Iran and even Saudi Arabia.
Essentially, there is growing fear that the instability in the Middle East and in Northern Africa is just beginning to flow, rather than ebb, and greater uncertainties and volatility are going to push oil prices higher in a trend that isn't going to last just a few months, but possibly for years. Of course, this fear might be based on the same kind of logic that inspired many in real estate to claim that housing prices would increase forever, even just before that bubble burst.
So, what does all this mean for hybrid buyers?
If you need a new car in the next few months, it seems highly unlikely that hybrid prices will fall any lower than they are today. And there is some chance that prices could increase in the next few months.
Therefore, shop around. You might still find a deal. Check out smaller dealerships in less affluent areas. Right now, that seems to be where the best deals can be located, at least based on my limited shopping – something I will be doing more of in the coming months, so stay tuned.
On the other hand, if you're not desperate for a new car, waiting isn't a bad idea, but it isn't necessarily a perfect solution either.
While history often does repeat itself, it doesn't always repeat itself, and there is a chance the world is heading into a new era of energy driven by frequent supply disruptions. What that really means is anybody's guess, but it certainly doesn't mean that cheaper hybrids are guaranteed to be just around the corner.
However, if you need a barometer, keep an eye on the Middle East. The longer tensions escalate, the longer higher gas prices will remain, particularly since current prices have done little to significantly decrease gasoline demand thus far. Perhaps $4.00 gas is just the new norm for the US, and while that might not be enough to result in dealership add-ons, it might mean that this is as good as hybrid prices get for some time.