High gas prices are having a huge effect on both consumers and the auto industry and there's no sign of it letting up. Already this summer petrol has surpassed $1.40 a litre, and in April CIBC World Market economists made the gloomy prediction that prices will skyrocket to $2.25 a litre by 2012.
But before forking over hundreds to fill your pickup or SUV to head up to the cottage, now might be the time to unload that gas-guzzling behemoth — before nobody wants it. A forecast released in late April by Scotiabank says used-car prices are softening and will continue to do so into the first half of 2009, meaning the price car dealerships offer for trade-ins is going to nose-dive.
A ROCK AND A HARD PLACE
"If people hang on to their big vehicles they're going to pay for that in gas," says Tony Faria, an auto industry analyst at the University of Windsor's Auto Research Centre. The other downside of keeping the thing is you might not get much value for it when you trade it in down the road.
Consumers in the States are already ditching their large SUVs and trucks in droves. Canadians, however, haven't followed suit. Bryan Wold, General Sales Manager at Dan Murphy Ford, a new and used dealership on the outskirts of Ottawa, says that so far he hasn't seen any increase in used SUV trade-ins.
But he has noticed a trend directly related to soaring fuel prices.
"We're seeing increased traffic of people who've bought larger and mid-sized SUVs coming in looking for four-cylinder cars," he says. "They're holding onto their SUVs and keeping them at home more often. They want something cheaper that they can commute with."
USED-CAR WOES
The choice to hold onto larger vehicles is surprising considering that Canada's used car market faces challenges on several fronts in the coming year. According to Carlos Gomes, a Scotiabank senior economist and auto industry specialist, a coming dip in the price of new cars will push down second-hand prices, imports of used cars from the States will undercut Canadian prices, and the 550,000 car and light-truck leases due to expire this year will flood the market — all factors which are being influenced by rising unemployment and fuel costs.
SOMETHING NEW
With prices softening on all sides, and especially in the new car market, now is the time to pick up a smaller vehicle if you're looking for a change. "Small cars are becoming more important than they've been in the past decade," says Mr Gomes. "They had a 32% share of the market last year, but in 2000 had less than a 29% share of new sales. Hybrid vehicles have also been gaining a bigger share. Even though the upfront cost is prohibitive there is quite a bit of difference when it comes to the pump."
So what will get you the most bang for your buck? A new 2008 Toyota Prius, priced at about $29,500 will get you 7 litres/100km, a Honda Civic DX priced at $16,990 will get you 8.5 litres and a manual Mazda3 priced at $17,895 will get you 9 litres, just to name a few. Or, if you have time to spare before you buy, wait until early next year when Honda plans to launch a low cost hybrid to compete with the Prius in both fuel efficiency and cost.
To compare fuel economy of Canadian vehicles, consult the federal government's Fuel Consumption Guide 2008 at www.oee.nrcan.gc.ca/transportation/tools/fuelratings/fuel-consumption-guide-2008.pdf or call 1-800-387-2000 for a copy.
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PHYSICIAN LIFE
