The Flip Side (Barclays)
Do High Gas Prices Change How Americans Buy Cars?
Why It Matters
Understanding how fuel costs influence vehicle preferences helps gauge the resilience of the U.S. auto market amid economic uncertainty and informs manufacturers’ strategy around pricing, electrification, and new mobility services. As consumers face higher vehicle prices and loan payments, the episode sheds light on shifting demand patterns that could shape future industry growth and policy decisions.
Key Takeaways
- •Gas prices above $4 pressure vehicle affordability.
- •SUVs and pickups still dominate U.S. new‑car sales.
- •Average new car price rose to $46,000 from $34,000.
- •Higher‑income buyers now account for majority of purchases.
- •EV adoption remains low despite higher fuel costs.
Pulse Analysis
U.S. gasoline hovering just above $4 a gallon has reignited the age‑old question of whether fuel costs can reshape American car buying. While fuel only represents about 3 % of household spending, it accounts for roughly 15 % of the per‑mile cost for owners, enough to influence preferences when prices stay elevated. Historical data shows an inverse relationship between oil prices and the share of gas‑guzzling SUVs and pickups, which fell to 14 % of new‑car sales when crude hovered near $95 per barrel and rose as oil slipped into the $50s. Yet today’s market still leans heavily toward larger crossovers, suggesting that short‑term price spikes may not be sufficient to overturn entrenched vehicle mix.
Affordability pressures are far more pronounced than fuel costs alone. The average new vehicle now sells for about $46,000, up from $34,000 pre‑COVID, pushing the typical monthly loan payment to $770 versus $550 previously. Combined with higher interest rates, auto‑loan delinquencies have crept toward historic highs. This stress is unevenly distributed: households earning under $100,000 fell from two‑thirds to under half of new‑car buyers, while those with incomes above $200,000 now represent roughly 20 % of the market. Consequently, many price‑sensitive shoppers are shifting to the used‑car segment, where inventory has absorbed the one‑million‑unit shortfall in new‑car sales.
Despite the fuel price shock, electric‑vehicle (EV) penetration remains modest in the United States, staying below 10 % of new sales, far behind Europe’s 25 % and China’s over 50 %. The gap reflects limited affordable EV models, longer driving distances, and less supportive policy incentives. Even attractive lease offers on models like the Tesla Model 3 have not sparked a mass shift. Looking ahead, autonomous‑vehicle fleets could offer a lower‑cost alternative to ownership if per‑mile costs fall toward $1, but at today’s $3‑$5 rideshare rates, they remain a niche complement rather than a replacement for personal cars.
Episode Description
Gasoline prices in the United States have risen to over $4 per gallon since the Iran war began in February. When combined with higher car prices, higher interest rates and rising auto loan delinquencies – not to mention other affordability concerns consumers face – might consumers change their car buying preferences?
In this episode of The Flip Side, Brad Rogoff, Global Head of Research, and Dan Levy, US Autos and Mobility Equity Research Analyst, debate whether higher fuel costs are the straw that breaks the camel's back, or if strong vehicle preferences and a more concentrated set of affluent buyers are enough to hold current dynamics.
They also discuss whether fuel costs could be a catalyst for electric vehicle (EV) adoption, and if technology improvements could make autonomous ride hailing a credible alternative to car ownership in the future.
Listeners can learn more about this topic:
Flip Side ep.79: Will the US consumer hold up in 2026?
Barclays Brief ep.12: Robotaxis: The future of mobility
Clients of Barclays Investment Bank can read our latest reports by logging in to Barclays Live:
Gauging the impact on autos from higher oil prices - questions on mix, inflation
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