Both Car Prices and Gas Prices Are Rising, and Fast

by Gabrielle DeSantis

Many factors go into the decision of which vehicle to buy. One of the most important of those is fuel economy. Other factors may include performance, comfort, and aesthetics, among other things. When choosing a vehicle to buy, it’s important to stay up with current trends affecting overall vehicle cost. Recent trends are showing that both car and gas prices are rising fast.

Car and gas prices have been low

Gas Pump | Getty Images

For a while, fuel prices had been low. According to the U.S. Energy Information Administration, gas prices were a low $1.87 per gallon in February 2016. While the prices did not stay that low for long, they did not increase by too much either. Between February 2016 and April 2020, gas prices never eclipsed $3.00 per gallon and typically stayed in the mid $2.00 range.

Cars have seen a similar trend in pricing. CarGurus used car price trends tool shows that the average cost of a used car in February 2016 was $21,854. Over the next 4 years, the average used car price trends slowly downward. In June 2020, used car prices saw their lowest average cost at $20,306.

Gas prices did not stay low forever, however. According to Jalopnik, gas prices have risen from an average of $2.18 per gallon in July 2020 to a staggering $3.13 per gallon one year later in 2021. Gas prices are likely to continue rising by up to 20 cents in August 2021. The last time gas prices have been this high was back in October 2014, when the national average was a high of $3.25 per gallon.

A lot of factors could have been attributed to the spike in gas pricing. “Robust gasoline demand and more expensive crude oil prices are pushing gas prices higher,” says NewsRoom. In addition, Tropical Storm Elsa is on the watch for potential interruptions to the Gulf Coast crude and gasoline production. Demand is high during the summer, especially around major travel holidays like Independence Day and the upcoming Labor Day. Supply has not been able to meet demand.

Like gas, car prices have also increased by an astonishing amount. If you’ve taken a look at new cars in the last several months, you will mind that many dealers are selling their vehicles for higher than MSRP. In addition, the used car market is being affected by the lack of new car buyers, which is driving prices up.

According to Jalopnik, demand for new cars is at an all-time high, and there is little supply to meet it. One major factor contributing to this is the global semiconductor shortage that affects many industries worldwide. “A global semiconductor shortage has been hurting the auto industry in the worst way, as even those semiconductor chips that are getting made are going to tech companies.”

How to keep your vehicle budget under control

Despite the increase in gas and vehicle prices, there are ways to keep the cost reasonable. Practicing fuel-saving methods such as intermittent use of the air conditioner, keeping your vehicle at a consistent speed, and keeping your windows up are just some of the ways to help preserve gas.

Choosing a vehicle with a good fuel economy can help tremendously. The better the fuel economy on a vehicle, the cheaper it will be to keep it running. Avoiding luxury vehicles can also help keep costs down. Not only do luxury vehicles cost a lot themselves, but many of them also require premium fuels, which are pricier than standard fuels. 

While gas and car prices continue to increase, deploying smart automotive financial practices like these will counteract some of the steep prices we are currently seeing. Once prices inevitably come down, continuing to utilize these methods will save you even more money.

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