“On average, prices of fuel-inefficient used cars fall a lot and those of fuel-efficient used cars rise a lot when gasoline prices increase … So if you drive a lot be aware. But if you drive a little, you should buy a used fuel-inefficient vehicle when the gas price goes up.”
This is the advice of Florian Zettelmeyer, a marketing professor at Northwestern’s Kellogg School of Management whose newly published research indicates that over the years, consumers respond to the rise and fall of gas prices in an entirely rational manner. In other words, they factor gas mileage in to the equation for what car to buy and how much to pay, but don’t go overboard. One of Zettelmeyer’s colleagues explains that shifts in the decision as to which car to buy are incremental:
“People change the cars they buy, but not all that much,” [Kellogg management professor Meghan] Busse explains. “The study tells us that they’re not going to abandon SUVs and pickup trucks entirely if gasoline prices go up.”
According to the research—and commonsensical laws of supply and demand—as gas prices rise, the number of consumers interested in vehicles with mediocre or poor gas mileage declines. Which is why, even as new and used cars reach overall high prices, the gas guzzlers are relative bargains.
Of course, if you drive a lot, it’s dumb to buy a car that gets bad mileage, no matter how much you “save” when making the purchase.
