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Study Finds Both Unemployment Rate and Fuel Price Influence Buyers’ Decisions on Fuel Economy of Vehicles Purchased

From October 2007 to April 2009, the average fuel economy of purchased new light-duty vehicles improved from 20.2 mpg US (11.6 L/100km) in October 2007 to 21.3 mpg (11 L/100km) in April 2009. A new study by a two researchers at the University of Michigan’s Transportation Research Institute (UMTRI) found that during this period both the unemployment rate and the cost of gasoline influenced buyers’ decisions concerning the fuel economy of vehicles purchased.

During the same period, the volume of sales plummeted. Michael Sivak and Brandon Schoettle also found that while there was a significant negative relationship between the unemployment rate and the number of vehicles purchased, the price of gasoline did not have a major impact.

The study examined the relationship between two economic indicators—the unemployment rate and the price of gasoline—and purchase decisions of new vehicle buyers. Sivak and Schoettle performed two regression analyses, one focusing on the number of vehicles purchased and the other one on their rated fuel economy.

Among the conclusions of the study:

  • The unemployment rate accounted for 89% of the variance in vehicle sales; the price of gasoline was not a significant factor in the model.

  • Both the unemployment rate and the price of gasoline had significant effects on the average fuel economy of purchased vehicles, and accounted for 53% of the variance in the average fuel economy.

The present analysis suggests that there were two different processes influencing vehicle-purchase decisions with respect to fuel economy. In early 2008, when the unemployment rate was relatively low, the increased price of gasoline led to an increase in the purchases of those relatively expensive vehicles that are fuel-efficient. This ended when gasoline prices declined in late 2008. However, as unemployment continued to rise into early 2009, purchases of large and expensive vehicles (which, in general, are relatively fuel inefficient) declined more than purchases of small and inexpensive vehicles (which, in general, are relatively fuel efficient). Thus, with relatively low gasoline prices and high unemployment, the fuel economy of the new-vehicle fleet improved by an increase in the proportion of purchases of inexpensive vehicles.

—Sivak and Schoettle

CO2 emissions per driver down. A companion study by Sivak and Schoettle for that period found that as a consequence of the improved fuel economy of purchased new vehicles and the decrease in distance driven, the carbon dioxide emissions per driver from purchased new vehicles were lower in each month when compared to October 2007.

For this analysis, the two assumed that the known overall decrease in vehicle miles travelled were equally applicable to the subset of drivers that purchased new vehicles.

American drivers have recently decreased their amount of driving and purchased vehicles with better fuel economy. By itself, the decrease in the amount of driving for the entire fleet of vehicles has resulted in a 3% reduction in carbon dioxide emissions per driver in April 2009 (the latest month examined) when compared to October 2007. Furthermore, because buyers of new vehicles have tended to purchase more fuel-efficient vehicles, their contribution to the decrease in carbon dioxide emissions was even greater.

—Sivak and Schoettle

These studies were supported by the research consortium Strategic Worldwide Transportation 2020. Current members include Bendix, Bosch, Continental Automotive Systems, FIA Foundation for the Automobile and Society, Ford Motor Company, General Motors, Nissan Technical Center North America, and Toyota Motor Engineering and Manufacturing North America.

Resources

Comments

sulleny

"21.3 mpg (11 L/100km) in April 2009." Still damned pathetic IMO.

Ken

"Study Finds Both Unemployment Rate and Fuel Price Influence Buyers’ Decisions on Fuel Economy of Vehicles Purchased"

Wow. Economic news and fuel costs influence new vehicle buyers?

Gee, that would have been, like, my seventeenth guess.

Patrick

Ken,

It is the numbers that are interesting, not the headline.

Just like the wealthy are closing the drawstrings on their purses even if they have not had a personal hit from the economic downturn simply for the fact of their being a down turn (which makes the downturn slightly worse than it really is).

The Goracle

.

How much money was wasted on this "study?" To pay someone for a "study" like this is absurd. It's all about $$$$, political favors, and control of people's lives.

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Patrick

Goracle,

Do you hold stock, options, or bonds for the companies who are part of the "consortium"? If not, then what concern is it of yours if they waste PRIVATE money on such studies?

It is the role of professors to take on such research studies in addition to teaching bringing money into the university.

ejj

The point is it's the University of Michigan doing another b u l l s h i t study on something that's obvious, like the EPA giving them tax dollars to tell us living next to interstates in urban areas is unhealthy. Michigan has the highest unemployment in the country and the University of Michigan is spending its time researching this crap? It's so sad how downhill that school has gone.

sulleny

"By itself, the decrease in the amount of driving for the entire fleet of vehicles has resulted in a 3% reduction in carbon dioxide emissions per driver in April 2009 (the latest month examined) when compared to October 2007. "

While they're at it they should calc the increase or reduction in CO2 caused by driver respiration. Compared to walking or running to their destination.

Mark_BC

Animal respiration doesn't contribute to carbon dioxide buildup, if you do the accounting. It comes from food we ate which originally pulled that CO2 out of the air a few months earlier so the net CO2 production is zero (unless you include deforestation to make the farmland and transportation etc etc but that's not the food directly). Fossil fuels do add CO2 because that carbon has been in the ground for millions of years, from a time when the sun shone dimmer and higher CO2 concs resulted in a similar climate to what we have now.

Ken

Patrick: I agree. Numbers are interesting. Too bad I can't open the reports.

My comment expressed frustration with the people who write these press releases and articles. Trying to read this one was a mind-warping experience, and not in a good way.

FWIW the message does seem to be as you suggest. The wealthy do give more weight to a general economic condition (high unemployment) than to gas prices when they plan a large purchase.

A car purchase is optional to them. They aren't driving wrecks now and probably could postpone a car purchase for a decade w/o being greatly inconvenienced.

At the other end of the economic scale a replacement vehicle may be needed right now. You buy something or you can't drive to work in the morning.

That does not mean you will buy a new small car, but it means you buy something now.

The Goracle

Patrick said:

Do you hold stock, options, or bonds for the companies who are part of the "consortium"?

Why, yes! Although not stocks, options, or bonds. I have money taken from me every year by the federal government in the form of taxes. I am now part owner of some of the consortium member companies.


If not, then what concern is it of yours if they waste PRIVATE money on such studies?

It's not PRIVATE money when it is my tax dollars.

.

Alessio

@The Goracle

<< These studies were supported by the research consortium Strategic Worldwide Transportation 2020. Current members include Bendix, Bosch, Continental Automotive Systems, FIA Foundation for the Automobile and Society, Ford Motor Company, General Motors, Nissan Technical Center North America, and Toyota Motor Engineering and Manufacturing North America.>>

not really your tax dollars...

SJC

Don't bother him with the facts and truth, it only makes him mad. He wants to believe that his opinion is THE opinion. Inflated sick egos need that.

ai_vin

"At the other end of the economic scale a replacement vehicle may be needed right now. You buy something or you can't drive to work in the morning.

That does not mean you will buy a new small car, but it means you buy something now."

Funny you should say this; I'm not what you'd call rich (I push a broom for a living) but 4 months ago I needed a replacement vehicle because my old car lost it's transmission one morning on the road to work. By lunch that day I had a NEW car right off the lot: A little 4 banger that uses only 5.7L/100km.

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