Now is a good time to buy a hybrid even if gas prices decline
Hybrids have long term value
Earlier this year, before Middle East tensions set oil prices on fire, I claimed that foreign oil dependence was the top reason to buy a hybrid car. Unfortunately, it’s not that hybrid cars are going to end US dependence on foreign oil, but hybrids can help consumers hedge the impact of rising gasoline prices caused by our foreign oil dependence.
With oil prices racing to top $112 per barrel as I write this and national gas prices at $3.75 but primed to rise even higher, foreign oil dependence is nicely proving my point of why you should buy a hybrid car.
But, if you’re serious about buying a hybrid car soon, now is the time to get real.
If you live in one of the hot hybrid markets, such as in Southern California, then you’re already dealing with gas prices above $4.00. Those gas prices have been pushing demand for many hybrids, especially the Toyota Prius, much higher. Even before the Japanese earthquake, this demand was tightening supplies at some SoCal dealerships. Since the earthquake, however, this supply and demand problem has worsened. Production has slowed and some parts simply aren’t available, and it could take months to resolve these issues.
Yet gas prices have not finished their run. Consequently, hybrid supply and demand is destined to become a bigger and bigger problem, and that will mean deals that evermore favor dealerships, not consumers.
Quite simply, the hybrid deals available today are probably as good as they are going to get until there is a big pull back in gas prices. Thus, if you’re serious about buying a hybrid soon. Then get out there now.
I’ll just wait
In 2008 gasoline prices continued to rise through most of the summer before falling back significantly. As prices rose, many dealerships added hefty markups pushing many hybrid prices well above MSRP. Yet, consumers continued to buy, even though just a few months later, gasoline and hybrid prices crashed. Waiting could have saved many hybrid consumers thousands of dollars.
Are we headed for a repeat? Will this oil bubble burst? Is it time to wait for better deals?
Maybe. Unlike 2008’s supply and demand issues, today’s gasoline prices have a significant fear factor driving them higher. Until this fear declines, gas prices probably won’t recede much. Even worse, there is much news coming out of the Middle East and North Africa that suggests that today’s fear factor might not only last years, but could increase significantly. That could push gas prices much higher than they are today regardless of supply and demand fundamentals.
Nevertheless, what is the tipping point? At what price will gasoline become too expensive and drive demand much lower?
According to analysts, today’s gas prices are starting to impact new car consumer behavior. That means consumers are still buying the same amount of cars, but they are buying more efficient models. Demand for hybrids, for instance, is increasing. Nevertheless, consumers are still driving – indicating they can handle today’s gasoline prices.
Therefore, if the situation remains relatively the same as today, today’s gas prices could become normal. Believe it or not, but $4.00 gasoline might just be something consumers have to get used to, with occasional spikes pushing prices towards $5.00 or $6.00. If true, waiting to buy a hybrid might not be the most cost-effective decision today.
Besides, even if gas prices do pullback, the trend is still inevitably higher. Perhaps gasoline falls back to $3.00 this winter only to rise to $5.00 next summer, or the summer after that. One way or another, if the US doesn’t find a way to quickly reduce foreign oil consumption, gasoline prices will support a hybrid purchase through the next decade. And you can take that to the bank.