As gas prices in Los Angeles County hover around $6 per gallon, some Angelenos are considering trading in their fuel-burning cars for electric ones. If pain at the pump is pushing you closer to sealing the deal, here are some things to keep in mind.
Demand is high. Supply is low. It’s a seller’s market.
At car dealerships across Southern California, interest in electric vehicles has spiked right along with the price of gas ever since Russia invaded Ukraine at the end of February.
“Last week was the highest amount of phone calls and the highest number of inquiries to our website in the past two years by far,” says Doug Eroh, general manager of Toyota Longo in El Monte.
Notice he says “inquiries,” and not sales? That’s because you can’t sell cars you don’t have, and for months, supplies have been low.
Demand for electric vehicles was at an all-time high well before Russia’s invasion of Ukraine caused gas prices to skyrocket. Worldwide, the number of electric car buyers more than tripled from 2019 to 2021, according to a report from the International Energy Agency.
Meanwhile, the pandemic threw a wrench in the supply chain.
Car dealers across Los Angeles County say persistent shortages of key components like microchips and backlogs at ports have reduced the number of cars arriving at dealerships.
Toyota Longo in El Monte typically stocks at least a 30-day supply of cars, averaging between 1,500 and 2,000 new cars. Now, on any given day, Eroh says he’s lucky to have a one day supply — just 30 to 40 cars. “Most of those are pre-sold before they get here.”
It’s an industry-wide problem. At a Nissan dealership in Downey, manager Tim Hutcherson is facing such a severe car shortage that he’s asked employees to park in front of the dealership, rather than the lot across the street, to bolster the appearance of supply. “Got to be creative,” he says.
Should I buy now or wait?
Joseph McCabe, CEO of AutoForecast Solutions, put it simply. “If you don’t have to buy a vehicle now, don't buy a vehicle now. You’re not going to get a deal.”
Fed up with high gas prices and eager to support the American auto industry’s transition to electric, Los Angeles resident Lisa McRee, 60, spent hours over a recent weekend searching for an all-electric Volkswagen SUV. She says she called dealers from LA’s South Bay to Bakersfield, and that not one had a car to sell.
Then, she got a text message from a South Bay Volkswagen dealer. Someone who had ordered the SUV McRee wanted didn’t follow through on the sale. Suddenly, McRee’s dream car was available. “It won’t last a day,” the dealer wrote.
McRee didn’t see the text for an hour. By the time she replied, the car was sold. Frustrated, she decided to call off her search.
“I can still afford the gas,” she says. “I don't like it. But I can still afford it. I've now decided because the demand is so strong, I'm going to cool my jets and wait until gas prices come down when my used SUV is worth more again. And there's more availability for the EVs.”
Industry analysts like McCabe are hopeful that the industry will begin to recover by 2023. They encourage buyers to wait until legacy manufacturers and new players can introduce more cars to the market.
But here’s something else to add to the calculus: Most people need to take out a loan to buy a car, and borrowing money is getting more expensive. Last week, the Federal Reserve raised interest rates a quarter percent, and they’re expected to raise rates up to seven more times this year, and more next year.
That means by the time supply chains ease up and more cars hit the market, a car loan is likely to cost hundreds of dollars more per year.
Eroh, the Toyota dealer, offers different advice. If you’ve done your research and know which car you want to buy, go ahead and reserve it with a refundable deposit.
“You want to get in the queue,” he says. It could be months before that car is yours, and in that time, prices could go up. “You want to lock in that car at the price you can get it at today.”
Are electric cars more cost-efficient than gas cars?
Even in a buyer’s market, a car is a major expense. Electric cars tend to have higher up-front costs than gas-burning cars. But are they more expensive?
Joel Levin, executive director of Plug In America, says that when considering the costs between an electric car and a fuel-powered car, it’s important to consider the monthly cost of fueling and maintenance alongside the sale price of the vehicle.
“Generally, you'll see that an EV is not more expensive than a gas car,” Levin says, adding that electricity prices are typically more stable than the price of gas, and that electric cars — with fewer moving parts than gas cars — are less likely to break down.
According to Plug in America, the average cost of fueling a car with electricity is roughly the same as paying $1.16 per gallon.
The last time a gallon of gas in California routinely cost less than $2.00 was early 2004, according to data from the U.S. Energy Information Administration.