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New-Car Sales Expected to Stall as Gas Prices Rise

Over one-fourth of consumers say they are postponing car purchases as a result of high gasoline prices. . / Credit: Stalled car image via Shutterstock

Following a precipitous drop this March, sales of new cars are likely to slow during the second quarter of 2012, according to a new survey of consumer car-buying intentions. Rising gasoline prices appear to be the primary driver behind the drop.

TechnoMetrica, a market research firm, has interviewed U.S. consumers every month since 2007 to determine their interest in purchasing or leasing a new vehicle within the next six months. Their latest Auto Demand Index (ADI), based on telephone interviews with more than 900 respondents, showed a gradual but positive trend, beginning last August and peaking this January at an index of 105, or as strong as the demand was during the industry’s best sales year, 2007.

In March, the ADI abruptly dropped by more than half to 49. The April survey revealed an ADI of 67, confirming new-car purchase intention has dropped significantly from its January high. This continued drop in new-car purchase intent will likely express itself as lower new-car sales during the second quarter, TechnoMetrica said.

[High Prices at the Pump Gives Small Business Gas Pains]

The ADI has a very high correlation to actual new vehicle sales, the company said.

The No. 1 factor in the dramatic slowing of new-car consideration has been the rapidly increasing price of gasoline, said Raghavan Mayur, president of TechnoMetrica. Over one-fourth (26 percent) of consumers surveyed said they are postponing car purchases as a result of high gasoline prices.

The price of gasoline has a huge impact on people’s budgets and behaviors, according to TechnoMetrica research. High gasoline prices function as a regressive tax. They take money out of people’s pockets and have a negative effect on all of their discretionary spending as well as their new-car purchase intent.

"Rising gasoline prices appear to be the primary driver behind the drop in ADI," Mayur said. "It is not the only cause to be sure, but it has a very large and real impact on a family budget. Consumers today are saying they would rather address this problem by driving less and postponing new car purchases, rather than by buying smaller or alternate-fuel vehicles.”

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.

Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.

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