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KBB Gas Price analysis and price point effect on buyers from today’s Auto Remarketing

The climbing price at the pump is producing significant effects on what new- and used-vehicle shoppers are considering, according to the latest Kelley Blue Book Market Intelligence survey.

KBB analysts explained that the current economic situation, coupled with concerns over the level of prices at the pump, has resulted in 70 percent of shoppers saying they have shifted their vehicle considerations.

The survey revealed 43 percent of shoppers are delaying the purchase of a vehicle due to economic concerns and gas prices. And more than half of respondents — 51 percent to be exact — indicated they have reduced or stopped behaviors entirely such as vacationing, going out to eat, shopping and engaging in other activities for entertainment.

The latest survey shared a bit of a dire consumer feeling about where fuel prices are heading. KBB said 75 percent of respondents expect gas prices to rise in the next 30 days.

Kelley Blue Book pointed to data from the U.S. Energy Information Administration that shows gas prices are projected to rise throughout this year and into 2012.

Drilling deeper into the survey results showed the majority consumers (61 percent) already have changed their driving habits as a result of rising gas prices. The concessions these individuals might make include:
—48 percent are willing to change engine size such as choosing a four-cylinder versus a V6 or V8.
—36 percent are willing change vehicle size such as selecting a midsize sedan versus a large sedan.
—31 percent are willing to change vehicle category such as picking sedan versus SUV.

Kelley Blue Book Market Intelligence employed the Van Westendorf pricing model as a research strategy to understand consumers’ price sensitivity toward gas prices. As a result, analysts discovered the current optimum price point is $3 per gallon, with the acceptable range spreading from $2.75 to $3.25.

KBB thinks if prices remain around $3 per gallon, vehicle shoppers likely will not make major changes in vehicle consideration criteria. However, at the $3.50 per gallon price point, the firm contends more than half of consumers feel that gas is so expensive that it will affect their vehicle consideration.

And at $4 per gallon, Kelley Blue Book declared that 80 percent of consumers will shift vehicle consideration. Continuing on, at a price point of $5 per gallon, analysts stressed that 95 percent of consumer survey participants plan to make changes in the models they consider.

Analysts also pointed to a clear relationship between gas prices and alternative-fuel vehicle consideration:
The current national price for a gallon of regular gasoline in the United States is $3.12, according to AAA. Given this base point, KBB contends that if gas prices were to reach $4 per gallon by summer, interest in alternative-fuel vehicles could double in that time frame.

Read more here.

John Paul Strong

John Paul Strong combines his two decades of automotive marketing experience with a team of more than 140 professionals as owner and CEO of Strong Automotive.

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