Truck and SUV purchases are soaring. People seem to think that gas prices will never go back up.
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Clarissa's Blog 
I don’t understand SUV purchases. However with trucks, they have a multitude of uses more than your standard vehicle and generally last longer as well.
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Love this new format: easy to read and aesthetically appealing! 🙂
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Thank you! I hope we avoid the problems the old theme has been experiencing.
It got to the point where I couldn’t read my own blog from a smartphone!
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You should be celebrating this development as a sign the recession is over!
They represent hope and prosperity because people are buying vehicles instead of holding onto their new ones until they fall apart. They are buying trucks and SUVs because also feel optimistic about their transportation costs and perhaps feel they can afford to spend more for the long term (instead of nickeling and diming for gas.) :p :p
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Of course, it’s great that the recession is over. But the cost of petroleum has nothing whatsoever to do with that. It has a life that’s completely outside of national politics and economies. Look what happened to the Russians who forgot about that.
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I’m being facetious. Of course it’s stupid.
However, people buying trucks and SUVs means the personal transportation industry is rebounding. (Look at how many American made vehicles have been sold.) The personal transportation industry is an important American industry that supports myriad other businesses. During the recession, we were in danger of losing the auto companies (which make these SUVs and trucks.)The cost of gas is a direct and verifiable phenomenon for average people. Gas is a relatively inelastic commodity (iow, it’s difficult to cut back on.) With gas prices going down, they feel less pinched and spend that would have gone to gas on other things. This distracts them from the fact that many people are not getting raises in their current jobs and their health insurance costs have gone up. Americans only care about fuel efficiency when they are sad like in the late 1970s with “stagflation.” (My father would cheer himself up by saying “It’s not as bad as the 1970s”.) Therefore the buying of SUVs and pickup trucks is an important sign of the rebounding psychological health of the American people, which you should applaud. 😛 😛 😛
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This is a good argument against “the market is always right” and there is no role for public policy libertarians out there. As should be obvious I lean pretty conservative and libertarian on some things, but obviously many individuals are not able to properly think through the long-term economics of financial choices. Its a good case for the government to put in “dynamic policies” in this case such as a counter-cyclical gas tax. Basically gas prices go down (raw prices – crude + refining), and gas tax goes up. So federal gas tax is 18.4 cents now, but lets say for a dollar decline in raw prices maybe causes taxes to go up 10 cents. These prices around the margin are what is needed for long-term energy evolution / reduced dependence on oil etc.
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“They represent hope and prosperity because people are buying vehicles instead of holding onto their new ones until they fall apart. They are buying trucks and SUVs because also feel optimistic about their transportation costs and perhaps feel they can afford to spend more for the long term (instead of nickeling and diming for gas.)”
The problem with this interpretation is that people are buying vehicles that they can’t afford.
“Interest rates for six-year new-car loans are as low as 2.75%, according to Bankrate.com. Loan terms can be stretched to seven years, to where these younger buyers will be awfully close to middle-age before they finally get out from under it. Loan-to-Value ratios have soared well past 100%; everything can be plowed into the loan: title, taxes, license fees, cash-back, and the amount buyers are upside-down in their trade. The package is governed by loosey-goosey lending standards. Bad credit, no problem.”
And
“Auto loans to subprime borrowers (credit scores below 640) make up over 31% of all auto loans, according to Equifax. Outstanding loan balances have soared nearly 17% over the last two years. At this rate, they’ll breach the $1-trillion mark by the end of the first quarter this year.”
http://www.nakedcapitalism.com/2015/01/subprime-spikes-auto-sales-delinquencies-soar-industry-total-denial-fallout-hit-main-street.html
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Trucks are practical, while most cars really aren’t. A skilled worker can run a side business, hauling his ladders, tools, etc. in pickup. Not possible with a smart car.
When I buy a car, I require an MPG of 35 or better. Trucks don’t do that, but neither do many larger cars, sports cars, SUVs, minivans, etc. The difference between pickups and some cars isn’t all that much.
Examples: The 2015 Mazda 5 minivan offers 21 MPG. The 2015 Honda Odyssey offers 19 MPG. The 2015 Honda Accord and Mazda 6 sedans are both 26 MPG. A new RAM 1500 2WD pickup offers 20 MPG. A Toyota Tacoma 2WD gets 21 MPG.
http://www.fueleconomy.gov/feg/PowerSearch.do?action=noform&path=1&year1=2014&year2=2015&mclass=Minivans&srchtyp=newMarket
A practical consideration is that at no time has gasoline reached a price in the US that justifies the markup on hybrid vehicles over their gas counterparts. Gasoline has to reach over $5/gal. before investment in a hybrid makes financial sense.
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People don’t buy hybrids to save money. They do it to shame neighbors. And that’s priceless. 🙂
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