Will Rising Gas Prices Help Car Sales?

DETROIT (WWJ) - The recent spike in gas prices could end up being good news for car companies.

Prices have been rising all month, jumping between 40 and 60 cents a gallon, depending on the part of the country...with some areas seeing prices starting to creep over the $4.00 a gallon mark again.

In the past, these spikes would create a spike in small car sales. But, the last few times we saw gasoline prices rise, it helped increase vehicle sales overall.

"The vehicles on the road today, are very old, and those are not the most fuel-efficient," says Michelle Krebs, an analyst with Edmunds.com. "This could well spur some sales, as people will want to trade in old, less fuel-efficient, vehicles for the new modern, fuel-efficient vehicles."

The average vehicle on the road today is over eleven years old. Krebs says often higher gas prices lead buyers to realize that it is time to buy something newer, and more fuel-efficient.

"We're seeing much better fuel economy for all segments."

Small SUV's and small crossovers have seen particularly strong sales.

Analysts say Michigan gas prices, that were flirting with the $4 a gallon mark this weekend, were pushed up by unique issues.

"We continue to be dogged with refining problems in this region," said Patrick Dehaan of gasbuddy.com.

Deehan says a lot of issues have come to a head in a short period of time.

"In the past week, we've seen four refinery upsets, four refineries in the region suffering problems. I can't imagine it getting a whole lot worse."

We could even see some moderating in gas prices as those refineries go back on line.

But, Dehaan says, prices are at or near record levels for this time of year, raising concerns of higher gas prices as we get closer to the summer travel season.

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