Economic indicators as predictors of the number and fuel economy of purchased new vehicles

Abstract

This study examined the relationship between two economic indicators—the unemployment rate and the price of gasoline—and purchase decisions of new vehicle buyers. Two regression analyses were performed, one focusing on the number of vehicles purchased and the other one on their fuel economy. Both analyses used monthly data from October 2007 through April 2009. There are three main findings. First, during the 19 months examined, the average fuel economy of purchased light-duty vehicles improved by a substantial amount—1.1 mpg. Second, both the unemployment rate and the price of gasoline contributed significantly to accounting for the fuel economy of purchased vehicles in the expected positive direction. Third, while there was a significant negative relationship between the unemployment rate and the number of vehicles purchased, the price of gasoline did not significantly increase the predictive power of the model.