Demand for Fuel-Efficient Cars Surges as Gas Prices Rise

Demand for Fuel-Efficient Cars Surges as Gas Prices Rise

Financing a new car will get even pricier due to the Federal Reserve hiking interest rates seventy-five basis points earlier this month.

Much to the dismay of budget-conscious American consumers, used car prices are up nearly 17 percent over the past year. But, as reported by Fox News, certain models—hybrids and electric vehicles in particular—are seeing even bigger bumps in their sticker prices.

“While used car prices have seen minor decreases for the fourth consecutive month, prices remain elevated due to lingering supply constraints,” iSeeCars.com executive analyst Karl Brauer said in a release. “We are also seeing a significant increase in demand for used hybrid and electric vehicles as a result of high gas prices, with the cost of electrics increasing by 37.7 percent and hybrid cars increasing by 32.1 percent compared to last year,” he added.

According to the car search engine’s research, the top models driving the increase were the Hyundai Sonata Hybrid (up 47.8 percent from May 2021), Nissan Leaf (41.4 percent), Tesla Model S (39 percent), Toyota Prius Prime (38 percent), and Toyota Prius (36.3 percent). “Hybrid sedans have seen a resurgence in popularity after falling out of favor as consumers previously embraced hybrid SUVs due to their more affordable price and fuel-efficient drivetrains,” Brauer explained.

“The price increase for the Nissan Leaf, which was once the highest depreciating car on the market, is likely due to the surge in gas prices as well as the heightened desirability for the redesigned 2018 model that offers increased range and is now coming off lease to enter the used car market. Meanwhile, demand for used versions of the Model S waned in recent months as consumers embraced the more affordable Model 3 and the Model X SUV. But the long wait times for new versions of the Model S, which include March 2023 at the earliest for the base model, has driven consumers to the used market,” he continued.

Unfortunately, the current market appears to be just as painful for new car buyers as well. Per Reuters, according to a new report from auto industry consultants J.D. Power and LMC Automotive, buyers are shelling out a record $45,844 on average for a new vehicle this month—14.5 percent higher than last year.

“Vehicles continue to sell quickly and a significant number of vehicles are being ordered—or purchased—by buyers before they arrive at the dealership,” Thomas King, president of the data and analytics division at J.D. Power, said in a statement.

According to the latest data from Edmunds.com, per CNBC, the monthly costs to finance a new vehicle—at 5.1 percent over 70.5 months—now sit at an average of $656. Financing a new car will get even pricier due to the Federal Reserve hiking interest rates seventy-five basis points earlier this month. Another sizable rate increase is likely coming in July.

Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters