Gas prices continued their ominous ascent last week, breaking records with a gallon of regular unleaded fuel costing $3.84 on average in Montana, and a gallon of diesel costing a jaw-dropping $4.57. Nationwide summer travel is expected to decrease for the first time in a decade, with a trifecta of anxiety causing Americans to re-evaluate their driving habits, including broad economic uncertainty and diesel prices driving up the cost of all consumer goods.
The precipitous rise in fuel prices has auto dealers throughout the Flathead scrambling to figure out how to weather a “crisis” that isn’t likely to end any time soon, if ever.
“We’re all worried about it,” said Jim Hamik, owner and operator of Jimmy John’s Auto Sales in Columbia Falls. “I’d say a lot of dealers are really scared.”
But in a state like Montana, auto dealers face an uncertain future when trying to predict what types of vehicles will be in demand over the coming months and years. Drivers want cars with better gas mileage, but for many, a four-wheel drive vehicle remains a necessity.
And despite a steep drop-off in demand for diesel trucks, dealers say a solid market persists for full-size trucks and sport utility vehicles. In a state with agriculture, builders and recreationalists towing boats and trailers, the need for trucks outweighs the increase in fuel cost.
“You’re not going to find any farmers or ranchers that are pulling their gooseneck trailers to town with a Subaru,” said Jim Robinson, executive director of the Montana Independent Automobile Dealers Association (MTIADA), but added, “I think it is the most unstable market that I’ve seen in 35 years.”
In interviews with several used car dealers around the valley, they say the market is changing rapidly, in some ways for the worse. A construction slowdown in the Flathead means less builders are buying trucks, and middle class people are simply not buying cars right now at all. But for many of these dealers, after decades in the business, this is not the first fuel crisis they have weathered, and the market for trucks and SUVs is hanging on. Still, prices on larger vehicles are dropping while cars with better fuel economy are growing scarcer and more expensive.
Paul Biolo, co-owner of Midway Motors in Whitefish estimates a fuel-efficient passenger car that would have sold for $10,000 this winter, he would now price at about $11,000, while the prices of trucks have gone in the opposite direction. Other dealers estimate diesel truck prices have dropped $3,000 to $6,000 over the last six months.
“It gets down to adjusting,” Biolo said. “We have more fuel efficient cars on the lot.” But the truck deals continue to draw buyers.
“I sold a full-size truck today,” Biolo added. “I’ll definitely replace the truck I sold today too.”
Robinson said there are more factors contributing to the rising price of economy cars than just increased demand. Most used car dealers in the Flathead, and throughout the state, purchase their vehicles at large regional auctions in cities like Spokane, Seattle and Portland. These auctions used to offer a wide range of vehicles that were previously leased, or belonged to rental car companies.
But domestic auto manufacturers like Ford, General Motors and Chrysler cut back on their fleets in commercial rental markets by 50 percent, Robinson said. And while Japanese automakers like Nissan and Hyundai have stepped in to fill the rental market gap, better buy-back programs by those foreign car companies mean fewer smaller, fuel-efficient cars make their way to the regional auctions and onto the lots of Flathead dealers.
“Those vehicles are limited at the auctions because everybody wants them,” Robinson said. “There’s a real shortage of cars, so they are bringing more money; there’s no doubt about that.”
So dealers continue to purchase SUVs and trucks because they’re available and cheap, but some remain ambivalent about the risk of continuing to buy these vehicles.
“Those are excellent buys right now, but they’re not good buys if they just sit there and you can’t sell them,” said Hamik, laughing.
Some dealers say they see overcompensation on the part of consumers paying more for fuel-efficient or hybrid vehicles than makes sense, economically. Joe Peters, owner of Joe’s Auto Sales in Columbia Falls, and also an MTIADA board member, said he knows a dealer who recently sold a hybrid vehicle for $25,000. With fuel-efficient gas-powered vehicles available for as much as $10,000 less than that, Peters wonders whether that hybrid will pay off the difference in fuel costs over the vehicle’s life.
“Which makes more economic sense?” Peters said. “You could buy fuel for the rest of your life!”
Higher fuel prices have caused a different sort of supply problem for Norman Art, owner of Great Scoot! motor scooters in Kalispell: He can barely replace the scooters as fast as they’re flying off his showroom floor.
Art’s sales have doubled over the last year, and the increase in motor scooter sales nationwide has made it harder for him to get his hands on bikes, but he’s not complaining. He plans to expand his business to a bigger store.
Art started his business to encourage people to ride scooters as an alternative way to minimize the environmental impact of their gas-powered travel, but the higher fuel prices have had the same effect.
“The handwriting is on the wall that cheap gas is gone,” Art said. “People are looking at their short-distance commutes more practically.”
His top seller? A 100-125 cubic centimeter engine scooter with a maximum speed of about 65 miles per hour, depending on the rider’s weight. A tank of gas on such a scooter costs about $5, and goes a long way compared to a truck, making for an easy sales pitch.
“Ninety miles to the gallon, versus 11 miles to the gallon seems to make a lot of sense,” Art said. “So that’s persuasive.”
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