Falling Gas Prices – It Looks Like a Great Time to Buy a Prius!

Posted by John Dolan | Posted in Automotive, Community, Driving, Family, Hybrids, Madison, News | Posted on 04-11-2014


Gas Prices LowBooming SUV, crossover and pickup sales can only signal one thing — low gas prices.  With average gas prices falling to below $3 per gallon according to AAA, hybrid sales have softened a bit.  Earlier this year TrueCar reported a shift in consumer car buying preferences away from hybrids and toward pickups and SUVs.   In September Prius sales were down a little more than 10 percent compared to a year ago.   Last month Prius demand was off 14 percent, as gas prices stabilized.  To boost demand hybrid sales incentives have gone up to levels equal to, or even surpassing those of their gasoline counterparts.  The average transaction price for hybrids has shrunk by $113, according to TrueCar, while the average price for gasoline vehicles has actually gone up by over $700.


Turn the clock back about seven years to a time when the Prius was at the ‘top of its game’ – – when demand and gas prices were high and dealer inventories were low or non-existent. NS4 captureBack then, the window sticker price was the selling price and incentives were virtually nil.  In fact, there were waiting lists for the Prius with many customers queued up for over a year waiting to take delivery.  In September 2007, the Prius sold with average incentives totaling only $91 (or about the cost of the floor mats).  Fast-forward to last month — incentives across the US for the Prius liftback averaged $2,309 per vehicle.  The fortunes of hybrid sales have always risen or fallen with the price of gasoline, so this is not particularly surprising. That falling gas prices cause consumers to tack back to larger format vehicles is nothing new.  A TrueCar analysis of current year registrations shows that full-size pickup trucks now lead sales in 34 of 50 US states with most of these states located in the South.  But,  as  Matt DiLallo of The Motley Fool pointed out in October of last year, “fracking — that process of injecting high pressure fluids into the ground in order to fracture rock and retrieve oil or natural gas in the shale regions of the Upper Midwest and Pennsylvania has also prompted an incredible demand for pickups.”   Those four-wheeled pickups are sometimes the only viable solution for workers to get to a wellhead, so it is the vehicle of necessity.  


Recently, West Texas Intermediate crude dropped to below $80 a barrel, the lowest level in more than two years after Saudi Arabia reduced the cost of its oil to U.S. customers.   U.S. crude imports from Saudi Arabia fell to a four-year low last month and according to FuelFix, the Saudi move is more about wanting to preserve its US market share in the face of soaring North American output.   FuelFix reports that oil “has collapsed into a bear market as leading members of the Organization of the Petroleum Exporting Countries resisted calls to cut production even amid signs of slowing global demand.”  Members of the group, which pumps about 40 percent of the world’s crude, “are engaged in an internal price war’ as they seek to defend their share of an oversupplied market”.  A US Energy Information Administration Market Prices and Uncertainty Report bears out that even as gas prices continue to slide due to robust supply and potentially weakening demand one thing is certain — these prices will remain historically volatile.  


Although at this point it would take a dramatic increase at the gas pump to wean some  buyers away from the larger format vehicles, this fall still looks like a great time to buy a hybrid. The third generation Toyota Prius has been on sale in its current form now since 2009 and despite help from the extended Prius family like the Prius v, Prius c and the Plug-in, sales of the traditional liftback have fallen off almost every month in 2014.  While it is still one of the best-selling Toyota models, it is obviously reaching the end of its current lifecycle.  Problem is, the next generation super-Prius won’t go into production for another year.  Therein lies the problem for Prius sales – low gas prices combined with the slack-end of a model cycle conspire to create a perfect storm for lagging hybrid demand.


Capture Welcome to PriusSo here’s the opportunity — slowing hybrid sales mean there are deals to be had and if you are a proactive car-buyer who wants a Prius now to prepare for the next time gas prices creep up to $4 per gallon there is no time like the present!  After all, whether gas costs $4, $3 or even $2 a gallon using less of this fossil fuel and saving money in the bargain is always a good idea!  So, if a Prius works for you (and not all of us want a SUV or a crossover), now is the time to act!



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