March is generally a good month to buy a car anyway, but with gas prices rising and Edmunds.com noting that average buyer incentives last month were flat from January and down $99 from last February, it's about to get a lot more interesting.
Pent-up demand, increased dealer discounts, model launches and the consumer's desire to be on a lot when the cars aren't all coated in a foot of snow usually make March one of the biggest months on an automaker's sales calendar. After a 23% year-to-date increase in car sales fueled by a 27% jump to nearly 1 million car sales in February -- the industry's highest monthly sales since August 2009 -- automakers aren't going to let a little thing like a 77-cent spike in gas prices downshift their numbers.
"That's probably not going to have a big impact on the total number of cars sold, but on the mix of what gets sold," says Jesse Toprak, analyst for TrueCar. "When gas prices rise, we see a shift toward more fuel-efficient vehicles, and already this month we've seen a shift toward vehicles getting 30 miles per gallon and higher consideration for hybrids."While it may be a good idea to get a more fuel-efficient vehicle when gas prices spike, it's better to buy one that's actually going to save you money in the long run. Edmunds notes, for example, that the $50,000 BMW X5 Diesel and its almost 23 mile-per-gallon average is better than that of similarly-priced conventional competitors, but still makes owners wait more than 25 years before they see substantial savings. The Volkswagen TDI and Nissan (NSANY) Altima Hybrid take 14 and 10 years, respectively, to produce fuel savings over their gasoline equivalents. "There are several good reasons to purchase a hybrid or diesel car, but in many cases, saving money isn't one of them," says Ronald Montoya, consumer advice associate at Edmunds.com. "Now that federal tax credits have expired, car buyers may be surprised to learn how long it takes for savings at the pump to offset the additional expense of buying a hybrid or diesel car." There are fuel-efficient deals out there. The Mercedes Benz GL-Class diesel is $1,000 less than the gasoline version and gets better mileage. The Toyota (TM - Get Report) Prius, the Lexus LS250h and the Lincoln MKZ Hybrid, meanwhile, all overcome their starting price and create substantial savings within their first year off the lot. With fuel prices just starting to rise and unrest in countries such as Libya and Bahrain continuing, Toprak says buying before demand hits may yield the best deals of all. "Continued unrest in the political and international arena has an effect on stability and on U.S. consumer perception, especially when they happen in countries with high oil production," Toprak says. "However, we're not really seeing a decline in total volume." -- Written by Jason Notte in Boston.
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