Fuel Efficiency Should Still Be a Major Factor When Buying a Car

by Kevin on August 8, 2014

Unless gasoline prices are on the rise it often seems as if fuel efficiency stops being a major factor when buying a car. It’s not that it’s unimportant – it just seems to become less important. Car prices, financing deals, vehicle safety ratings, and even “snob appeal” seem to become major factors.

But fuel efficiency should be a major part of your car buying decision no matter where fuel prices are at right now.

We’re being lulled to sleep by the quiet

Unless rising energy prices are a front-page story, we can forget all about fuel efficiency. We are in such a time right now, and it’s been caused by combination of factors:

  • Low interest rates
  • High stock market
  • Quiet energy front
  • New car incentives

The need for greater fuel efficiency just doesn’t seem to be as important in light of that combination of events. There’s a small percentage of the population who continue to see fuel efficiency is an issue. They look to buy either the most fuel efficient gas powered cars, hybrids, or all electric vehicles.

I would argue that we should all be thinking that way all the time.

As quiet as it is, gas prices are still high

As quiet as everything seems to be right now, there’s one fact on the fuel front that is inescapable. Even during a time of relative quiet on the fuel front, gasoline prices are still hovering somewhere between $3.50 and $4.00 a gallon. While we may be relieved that gas prices are stable, they’re certainly not low – at least not by historic standards.

Just 10 years ago – in 2003 – gasoline prices averaged $1.59 a gallon, which is to say that they’ve more than doubled since. Are gasoline prices really behaving when you look at the long-term trend?

Energy prices have always been volatile

You have to wonder, if the price of gasoline is this high during a period of relative price stability, what will it happen if there were a sudden event in one or more of the oil-producing countries that reduced worldwide supply? Could we stand another doubling of the price? How would the car that you now own, or are thinking of buying, stack up in a world where gasoline is priced at $7 a gallon?

I’m not bringing up this scenario to be alarmist, but the history of energy prices – and of gasoline in particular – has been one of extreme volatility. Prices can behave for many years, but then an energy shock hits and the price explodes.

The time to buy an energy efficient car is when gas prices are behaving

While it may be more comforting to ignore potential gasoline price volatility, and settle into the stability of the moment, when energy shocks hit they can come like a hurricane. Once gasoline prices begin to rise there will be no time to act.

The first line of defense against high gasoline prices is owning an energy efficient car. If prices suddenly rise, you’ll be locked in to the car that you bought and with whatever mileage it gets. If the car was not terribly fuel-efficient, you could be stuck.

Part of the problem is pure economics – supply and demand. When gasoline prices rise, the demand for energy efficient cars explodes. That sends the prices higher. The fuel-efficient compact you could have bought last year for $20,000, is now selling for $30,000.

Supply and demand also works in reverse, and that can work against you if your car can be considered to be something of a gas-guzzler. At the same time people are rushing out to buy fuel-efficient cars, they’re also selling their older, less fuel-efficient vehicles. When gasoline prices rise, there’s less interest in buying non-fuel-efficient cars. That situation is magnified by the sudden, large number of them that are up for sale. The value of your gas guzzler can plummet.

Should gasoline prices suddenly spike, you will not be able to react quickly, or even at all. So before you buy that next car, pretend that we are already in an energy crisis – and buy the most fuel efficient car you can. And when it does come, you’ll be ready.

How important you think fuel efficiency is in picking out a new car?

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