According to the U.S. Energy Information Administration, the average price of regular grade gasoline has jumped by 49 cents since the beginning of the year, which is 40 cents greater than the seasonal rise typically seen over this period. This accelerated rate of growth has many consumers wondering just how high gasoline prices will go.
“Right now we’re forecasting that prices for regular grade gasoline will peak at a national average of $4 per gallon in May,” said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide.
Banks points out that gasoline prices are being affected by the expectation that the oil supply in Iran will be disrupted – possibly by way of a military strike – rather than from any real loss in the amount of oil being produced.
With gasoline prices expected to peak at $4 per gallon in May, Banks predicts that fluctuations in used-vehicle prices will be mild by historical standards.
“Considering consumers have become accustomed to gasoline prices that averaged more than $3.50 last year, this time around we don’t expect to see dramatic shifts in the shopping behavior of consumers for more fuel-efficient vehicles when prices approach the $4 mark,” he said.
“Looking at opposite ends of the fuel-economy spectrum, prices for used compact cars, like the Ford Focus or Honda Civic, at $4 per gallon will increase by an average of $179,” Banks said. “Used prices for large SUVs, such as the Chevy Tahoe, will decline by $387, while price adjustments for other vehicle segments will land somewhere in between.”
Banks added that gasoline prices would have to move further into unknown territory for used-vehicle prices to change more dramatically. At $4.50 per gallon, compact car prices would increase by $638 or 3-1/2 times the rate of growth at $4, while prices for large SUVs would fall by $2,148 or 5-1/2 times the loss at NADA’s forecasted gasoline price peak.
Although current signs point to gasoline prices remaining below the high of $4.11 recorded in July 2008, there is still a heightened threat that some form of military action could be taken against Iran, Banks said.
“If military action is taken against Iran, then all bets on how high gasoline prices will go are off,” he said.
|Impact of the Rising Cost of Gas on Used Vehicle Prices|
|Expected change in used vehicle price under certain gas price scenarios.|
|Gas Price Scenario||$4.00||$4.50||$5.00|
|Source: NADA Used Car Guide|
About the NADA Used Car Guide
NADA Used Car Guide, over its 79-year history, has earned the reputation as a leader in providing accurate and comprehensive vehicle valuation products, services and information to businesses worldwide. NADA collects and analyzes more than 1 million combined wholesale and retail auto-related transaction prices each month. NADA guide books, auction data, analysis and data solutions offer automotive, financial, insurance and government professionals the timely information and reliable solutions they need to make better business decisions. For more information, visit www.nada.com/b2b.