Gas Costs Less, Demand and Prices for Used Hybrid Vehicles Fades

Washington DC March 6, 2009; The AIADA newsletter reported that we all remember when gas prices hit $4 a gallon last summer and the demand for hybrid cars skyrocketed.

But with low gas prices and a recession consumers have lost their appetite for pricey hybrids, two industry experts say, leading to a drop in used hybrid values and an oversupply of new ones.

According to USA Today, used hybrid values are down 23.5% since their peak last summer, and since the beginning of 2009, they've fallen 4.5%, while used vehicle prices overall are going up as more buyers opt for used over new.

With price sensitive consumers the average extra $3,000 cost of the hybrid over the non-hybrid equivalent isn't something buyers are comfortable with right now. Mike Jackson, CEO of auto retailer AutoNation, says demand for hybrids and other very fuel-efficient cars has fallen off a cliff.

"The industry switched over to producing fuel-efficient cars all summer, and now, all those vehicles are in stock," Jackson says. "Now, we have fuel-efficient cars as far as the eye can see." Jackson has favored increasing the gasoline tax, bringing the price of gas to about $4 a gallon to stimulate consumer demand for more fuel-efficient cars and trucks.

As gas prices have fallen, he says, "the great migration" in demand for trucks and SUVs is rising. He says now is not the time to raise fuel taxes, but the government could say it will.

"The situation with the economy trumps every other concern," he says. "But (the government) could certainly announce that there will be higher gas taxes in 2011 or 2012, and send the message that these $2-a-gallon prices are temporary."

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